Flagging off the first bus service between Srinagar [Images] and Muzaffarabad in 57 years, Prime Minister Manmohan Singh [Images] on Thursday said the historic step will help foster peace and harmony between India and Pakistan.

Singh, who launched the service at a function in the Jammu and Kashmir [Images] capital attended by thousands of people, declared India's resolve to fight terrorism jointly with Pakistan.

United Progressive Alliance chairperson Sonia Gandhi [Images], Governor S K Sinha, Chief Minister Mufti Mohammed Sayeed, Union ministers Ghulam [Images] Nabi Azad, K Natwar Singh and Mani Shankar Aiyar, People's Democratic Party chief Mehbooba Mufti, National Conference president Omar Abdullah and several ministers in the Jammu and Kashmir government were present at the function at the Sher-e-Kashmir cricket stadium.

"India is willing to hold the hand of Pakistan to usher in peace, harmony, prosperity and hope on both sides of Jammu and Kashmir and this bus service will help in building bridges and roads of progress," Singh said in his 15-minute address.

• The road to peace: Complete coverage

Singh, who along with Gandhi, individually met all the 21 passengers who boarded the bus defying militant threats, termed the bus service as the biggest confidence-building measure.

He named the bus as 'caravan of peace,' and said the service was a small but significant step towards establishing good neighbourly relations. It would open a 'new chapter' in the chequered history of the two countries since 1947, he added.

"We want to make people of Jammu and Kashmir a participant in this process," he added.

"This is the first step on a long route (of peace). There are more challenges in the road ahead," he said.

He said the governments of the two countries had respected the aspirations of the people while deciding to launch the service.

Thanking Pakistan, especially its president Pervez Musharraf [Images], the PM said without their cooperation this 'door' of Srinagar-Muzaffarabad road would have remained shut.

Stating that the bus will fulfil the dreams of thousands of people and divided families who had lost contact after the road was closed down in 1953, Singh expressed the hope that the road will be opened for traders also, so that the 'delicacies of Kashmir are available in every part of Pakistan'.

The route should also provide business opportunities for traders to do business in Afghanistan and Iran, Singh said. The PM said other 'traditional' routes in Jammu and Kashmir should also be opened so that trade flourished in the state.

Assuring Jammu and Kashmir of the Centre's full support, the PM said, "We will do everything on economic front as far as Jammu and Kashmir is concerned."

"In this direction, 2005-06 plan was finalised at Rs 4,200 crore for the state," he said.

Singh praised the efforts of the army to complete the construction of the Kaman bridge, set up infrastructure and undertake repairs in the road in a very short span.

Gandhi said the bus service will foster brotherhood and bring prosperity in the region.

The country is committed to improving ties with Pakistan through a process of negotiations and other peaceful measures, she said.

She said opening of other routes to PoK may follow.

Mehbooba Mufti said the bus service is a 'new dawn'. "It will create a good environment through people-to-people contact."