Canadian authorities should have known that Air India Flight 182 was a terrorism target, former Supreme Court justice John Major has found in an inquiry into Canada's worst mass murder.

"A cascading series of errors contributed to our police and security forces" failing to stop the bombing, Major said.

He said government, the RCMP and CSIS all played a role in the failure and were unprepared to deal with terrorism. He also said authorities were incompetent in the investigation after the bombing.

"The level of error, incompetence, and inattention which took place before the flight was sadly mirrored in many ways for many years, in how authorities, governments, and institutions dealt with the aftermath of the murder of so many innocents," Major said in the report.

Prime Minister Stephen Harper called the report "a damning indictment of what occurred before and after the tragedy."

"Our government launched this inquiry to bring closure to those who still grieve and to ensure that measures are taken to prevent such a tragedy in the future," he said.

Harper met with some of the victims' families on Thursday.

"I'm sure it's a bittersweet day for the all of the families that are with me today," he said.

Major said the bombing was plotted and carried out in Canada and its intended victims were Canadians.

"I stress that this is a Canadian atrocity. For too long the greatest loss of Canadian lives at the hands of terrorists has been somehow regulated outside the Canadian consciousness," he said.

The report calls for stronger powers for the national security advisor to oversee communications between Canadian police and intelligence agencies.

He also called for compensation for the victims' families.

Harper said it was too soon to comment on some of the report's specific recommendations, saying they would require "analysis."

However, he did say the government would respond "positively" to the call for compensation and an official apology.

Liberal MP Bob Rae, who headed up a commission that recommended the federal government move forward with an inquiry in 2005, said during question period that the report still sees problems with security agencies' attitudes.

"There is a culture of complacency that is dangerous for the country," Rae said.

Harper responded that his government intends to move forward with changes.

NDP Leader Jack Layton thanked the government for calling the inquiry.

Family reaction

Rattan Singh Khalsi lost his daughter, 21-year-old daughter Indira, in the attack, and thanked Major for his report.

But he said the report "was not closure."

"What (Major) suggested may be good for the next generation but it is not going to change our lives, our pain is the same as Day One," he told CTV News Channel.

Khalsi had strong words about the government's response to the bombing, saying the government of the time was guilty of racism.

He pointed out that former prime minister Brian Mulroney offered condolences to the Indian government, even though the majority of the victims were Canadian.

"Mr. Mulroney, you said we were not Canadian, we were Canadian, sir," Khalsi said. "You treated us as foreigners."

"From Day One, they have treated us wrongly."

The inquiry

Major spent four years going through thousands of documents and hearing from more than 200 witnesses.

No one survived when a bomb exploded on the plane south of Ireland, killing 329 people, most of them Canadians. Eighty-two of the victims were under the age of 13.

The attacks were blamed on Sikh militants based in British Columbia, but only one man, Inderit Singh Reyat, was ever convicted of any crime related to the incident, and was a reduced charge of manslaughter,

Talwinder Singh Parmar, the suspected ringleader, was arrested but later let go on lack of evidence.

He left Canada for India, where he was shot dead by police in 1992.

Two other men, Ripudaman Singh Malik and Ajaib Singh Bagri, were acquitted at trial in Vancouver in 2005, outraging the victims' families.

Major's report contains five volumes, numbering more than 3,000 pages.

As of March 2009, the inquiry had cost $28.7 million.