Costly infrastructure has been set up across Germany

The German government has cancelled its contract with a consortium of top companies - called Toll Collect - because of costly delays.

Transport Minister Manfred Stolpe said the debacle was damaging to Germany's image and a blow to innovation.

The consortium had hoped the system would help it win big export contracts.

"Discussions will not be possible without substantial improvements," Chancellor Gerhard Schroeder warned the consortium formed by car manufacturer DaimlerChrysler, phone giant Deutsche Telekom and French toll road operator Cofiroute.

GPS tracking

Mr Stolpe warned on Tuesday that the government would take Toll Collect to court for compensation in lost toll revenue, the Associated Press reported.

New toll terminals were installed in petrol stations

The toll system, plagued by technical problems, is based on a device on board lorries which communicates with Global Positioning System satellites to track the vehicles' progress.

Infra-red detectors read licence plates and check them against a central database to make sure the lorries have been registered with the transport computer database.

Correspondents say the collapse of the scheme means Germany now faces a severe funding shortfall for infrastructure projects it had hoped to complete by 2006, when it hosts the soccer World Cup.

Pylons have been erected across the country holding banks of infra-red detectors above motorways.

The idea was that goods vehicles weighing more than 12 metric tons would pay between nine and 14 euro-cents per kilometre, depending on the weight of the lorry.

The consortium had originally planned to launch the scheme by 1 September 2003 but was not ready. It also missed a November introduction date.

The German government now plans to reintroduce a sticker system for collecting tolls, which it had abandoned last August.