The only script that I have which is capable of producing coloured smoke is Haroon1992's volumetric fog script. With a little tweaking, you can have coloured fog at one specific location (like the location of a gamelogic, or coordinates).
I believe the script is in his Operation Spark mission. I'm sure he won't mind you tweaking it, but I would probably ask him just to be sure.
The effect won't be exactly the same as a smoke shell. You would have to make a simple addaction and move the fog gamelogic (assuming you're using a gamelogic) to the player's position. You could then add a few sound effects.
With a bit more complex scripting, you could have the 'throw grenade' animation and have the fog spawn several metres in front of the player. I'm not entirely sure how to do this off the top of my head. You would need to find out the dir of the player, and setpos the gamelogic some distance in front of the player. I'm guessing you would need to do trigonometry (sin, cos, tan) to do this, but trig is one of my weaker areas. I know the command 'atan2' is used, just not entirely sure of how it would be written.
I'll try and find an example. Someone here with better knowledge of trigonometry than me will probably be able to help more.
EDIT: .........or you could just find and download a coloured smoke addon