Local police officer Imran Shahid said that the explosive and lots of safety fuse were hidden in a vehicle from the eastern province of Punjab.
Meanwhile, three militants were killed in a clash with security forces in Swat valley of NWFP, the private TV channel DAWN News reported.
The militants were trying to infiltrate the Banjir area when their movement was detected by troops. Official sources said a soldier was also injured during the clash.
Security forces also recovered a cache of arms and some wireless sets from their possession, sources said.