AGP Audit: Pakistan’s Motorway Electronic Toll System Is Running Without Its Core Verification Technology

There is a particular kind of institutional failure that is worse than a project that was never started. It is a project that was nearly paid for, partially built, and declared operational, while the one component that makes the entire system trustworthy was quietly left out. Pakistan’s National Highway Authority has delivered exactly that with its NHA Electronic Toll Collection system, and the Auditor-General of Pakistan has now put the audit irregularities in writing for the country to see.

A damning report by the Auditor General of Pakistan, covering fiscal years 2022-23 to 2024-25, has exposed serious irregularities in the NHA’s Rs12.2 billion Electronic Toll Collection project, a system that now operates on six motorways across the country, processing billions of rupees in toll revenue but doing so without the means to independently verify a single transaction.

The project was approved in May 2022 and awarded to the Frontier Works Organization through direct contracting, bypassing competitive tender, with an eight-month completion timeline ending March 28, 2023. By June 2025, NHA had paid FWO Rs10.75 billion, approximately 88 percent of the total contract value. The ETC system is operational in the sense that it collects tolls electronically. But the Automatic Vehicle Classification system, the component that independently authenticates what type of vehicle passed through, what it should have been charged, and whether the transaction recorded matches the vehicle actually present, has not been installed.

Without the AVC system, there is no independent audit trail for any of the Rs39.38 billion in toll revenue collected between July 2022 and June 2025. The AGP has concluded that the authenticity of every rupee in that figure is unverifiable.

The contractor failed to install the AVC system despite more than one year beyond the stipulated completion date, while no compliance record was maintained.

-the audit report states

FWO’s Explanation, and Why It Does Not Fully Satisfy

FWO attributed the AVC delay to import restrictions imposed during 2022-23 that affected the procurement of German-made AVC sensors valued at approximately Rs1.4 billion. The explanation has partial merit; Pakistan did impose import restrictions during that period as part of emergency foreign exchange management measures, and those restrictions did affect the procurement of imported industrial equipment.

But the import restriction explanation has a shelf life. Pakistan’s import regime has substantially normalised since the peak of the 2022-23 crisis. The AVC system remains uninstalled not because sensors cannot be sourced but because FWO has proposed alternative technologies that remain under review by the NHA. In other words, the original equipment is still not installed, the alternative has not been approved, and the deadline passed more than two years ago.

The audit’s observation that no compliance record was maintained during this entire period is a separate and more troubling finding. An Rs12.2 billion contract with an eight-month completion deadline either has compliance records, documentation of progress, delays, escalations, and regulatory responses, or it does not. The AGP found that it does not.

Rs3.5 Billion Held, Penalties Never Imposed

The AVC absence is the headline finding, but the audit uncovered several additional financial irregularities that compound the picture of inadequate oversight.

FWO retained Rs3.5 billion in enhanced toll collections during fiscal year 2024-25 for periods of up to three months before depositing the amounts with NHA. The contract specifies when collections must be transferred. The contractor held public revenue beyond that deadline – and NHA did not impose the contractual penalties that the agreement required it to enforce for delayed transfers. Public money sat in a contractor’s account for up to three months, with no financial consequence for doing so.

The audit also questioned Rs3.12 billion paid to FWO for operations, management, and maintenance services, covering firefighting, mechanised sweeping, rescue operations, road maintenance, and IT support. Auditors found no authenticated record confirming that these services were actually delivered as specified under the contract. Pakistan paid for services it cannot prove it received.

FWO also failed to furnish the mandatory Rs500 million toll revenue security required under the operations and management contract, a financial guarantee that exists precisely to protect public funds in the event of contractor non-performance. It was not provided, and NHA did not enforce the requirement.

The Third-Party Verification Problem

The National Highway Executive Board had specifically decided that an independent third party, the National Database and Registration Authority or the National Institutional Facilitation Technologies, should be engaged to verify and reconcile real-time traffic and revenue data. This was not a suggestion. It was a decision of the governing board of the authority responsible for the project.

It was not implemented. The AGP found that NHA lacked real-time visibility of traffic and toll collection data at its headquarters. Motorway-wise toll collections, escrow account deposits, and revenue-sharing records were either unavailable or incomplete at the time of the audit. The authority responsible for Pakistan’s motorway network could not, at the point of audit, produce complete records of what its own toll system had collected, where it had gone, or whether it matched the traffic that generated it.

This is not a technical deficiency. Real-time toll data reconciliation is standard practice in any professionally managed electronic toll system. The absence of it, on a system that has been operational for three years, is a governance failure.

The Procurement Question

The AGP also questioned the legality of how the project was awarded in the first place. NHA awarded the ETC contract to FWO under PPRA Rule 42(f), which permits direct contracting under specific circumstances. The auditors found that NHA did not establish the reasonableness of the contract prices through proper rate analysis, a foundational requirement of any procurement, whether competitive or direct.

The audit further noted that the contract contained provisions allowing subcontracting, despite procurement rules requiring state-owned entities executing direct contracts to perform the work using their own resources. If FWO was awarded the contract on the basis of being a state-owned entity capable of direct execution, and the contract then permitted subcontracting, the basis for the direct award is materially undermined.

Additional lapses identified by the audit include missing insurance policies, absence of manufacturer certificates for imported ETC equipment, failure to conduct mandatory testing and inspections, and NHA’s decision not to impose liquidated damages, contractual financial penalties for project delays, despite the project being more than two years past its completion deadline.

The Pak-Tag Promise

The ETC project was also supposed to include the development of the Pak-Tag system, a vehicle tagging infrastructure that would be owned by the NHA, giving the authority its own proprietary platform for toll management rather than full dependence on a contractor’s system. The audit found that NHA neither maintained records of unutilised M-Tag advances and accrued interest, nor took any meaningful steps toward developing Pak-Tag. The promise of a government-owned toll infrastructure system remains exactly that, a promise.

What the AGP Recommends

The Auditor-General’s recommendations are comprehensive and specific. They include immediate installation of the AVC system, engagement of an independent third-party auditor for toll revenue reconciliation, strict enforcement of all contractual provisions, recovery of penalties and delayed payments from FWO, and expedited development of the Pak-Tag system.

The recommendations are sound. The question is whether they will be acted upon, or whether they will join the long list of AGP findings that are acknowledged, filed, and left unimplemented while the irregularities they document continue.

The Bottom Line

Pakistan’s motorway electronic toll system is functioning infrastructure in the operational sense; transactions are processed, revenues are collected, and vehicles pass through barriers. But it is a system operating without the verification layer that makes those transactions trustworthy, without the oversight that makes the revenue accountable, and without the contractual enforcement that gives any of the financial arrangements legal and financial integrity. Rs39 billion has been collected. None of it can be independently verified. Rs10.75 billion has been paid to a contractor whose most critical deliverable remains missing. And the authority responsible for all of it, according to the AGP, cannot produce complete records of what it has collected, where it went, or whether it was earned. That is not a project with implementation challenges. It is a project that has failed its most basic purpose while appearing, on the surface, to work.