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"I think it was a mine," Deputy Interior Minister Mohammad Munir Mangal told reporters at the scene.
"There are reports of another blast in the city, but it has not yet been confirmed."
The bus was completely destroyed by the blast and shop windows were shattered all around.
Residents helped police pick up pieces of flesh and put them into plastic bags.
"The explosion happened just after a group of Afghan National Army soldiers got onto the bus," said witness Mohammad Zaher, who had cuts in his forehead from flying glass. © 2007 Australian Broadcasting Corporation