Canada's [Images] new conservative government has ordered a public inquiry into the 1985 Air India bombings, in which 329 people on board were killed.

The country's former supreme court justice John Major will head the "thorough and compassionate investigation", which is to begin immediately, Canadian Prime Minister Stephen Harper told the Parliament on Monday.

The commission will hold public or in-camera hearings to determine whether authorities were aware of the threat of Sikh terrorism and prescribe remedies to prevent such a disaster in the future. It will also examine circumstances that led to the acquittals in the case.

• The Kanishka bombing

Announcing the decision in the House of Commons, Harper said this move would give "some comfort to the victims' families and Canadians a better sense of society".

The Montreal-London Air India Flight 182 crashed off the coast of Ireland on June 23, 1985, killing all the 329 people on board. An hour earlier, a bag containing bomb exploded at Tokyo's Narita airport killing two baggage handlers.

"It is the duty for every Canadian to do everything possible to avoid a repeat of such tragedy. We must sadly admit (justice) may never come to pass," the Canadian premier said.

"They and their families came to Canada to seek a better life for themselves in a country with unlimited opportunity. The stories and the dreams of those 329 people were shattered by that terrible tragedy," Harper said.

Justice Major was appointed two months ago to recommend guidelines for an inquiry after consulting victims' relatives.

The commission, while ensuring that the inquiry does not jeopardise the ongoing criminal investigations, will examine whether there was any "systemic problems" in the effective cooperation between the Canadian Security Intelligence Service and the Royal Canadian Mounted Police in the investigation.

It will also examine the manner in which the Canadian government should address the challenge as revealed by the investigation and prosecutions in the Air India matter and whether Canada's existing legal framework provides adequate constraints on terrorist financing.

Both Harper and Justice Major have met with the families of the victims and discussed the terms of reference for the inquiry.

"The families of the victims continue to demand answers that only a full public inquiry can provide into the senseless slaughter. As a nation we have a responsibility to ensure that we have learned from our past mistakes and that we are equipped today to identify and deal with terrorist threats before more Canadians become innocent victims," Harper said.

Welcoming the announcement, Parliamentary Secretary to the Minister for Foreign Affairs Deepak Obhrai said, "It is a historic victory for people of Indian origin and citizens of this country who have been demanding for the past two decades a full judicial inquiry into the bombings." 

Harper said, "This inquiry is not a matter of reprisal, nor is it intended to go back over the criminal trial. That would serve no purpose."

It will try to find answers to "several key questions that have emerged over the past 20 years about the worst mass murder in Canadian history," the Canadian premier said.

"It is our sincere hope that this action may bring a measure of closure to those who still grieve for their loved ones," Harper was quoted as saying by the Canadian media.

Even after 20 years of investigations and spending about $116 million, the costliest probe in the Canadian history, only one person Interjit Singh Reyat, has ever been convicted in the attacks.

Reyat was sentenced to five years in prison in 2003 for lesser charges of manslaughter and with assisting in the construction of the bomb after he agreed to testify against two other suspects, Ripudaman Singh Malik and Ajaib Singh Bagri.

Malik and Bagri were acquitted after Reyat claimed in the court that he could not remember them. The acquittal infuriated the vicitms' families demanding a full fledged inquiry into the bombings.