It is believed that the outfit works with the Border Action Team of the Pakistani Army, which helps in the infiltration of militants into the Valley.
Sources in the security agencies told The Hindu that a group of militants had carried out reconnaissance in the city in the past month.
Eyewitnesses said there were at least three armed attackers.
"A big group had infiltrated".
Briefing the media on the attack that took place in the early hours of Tuesday, IGP Kashmir Munir Khan said, "I don't know how some sections of media are saying its a setback, it is not". He said soldiers were responding to the militants' gunfire.
Senior intelligence officers stated that any future attacks in Kashmir would most likely be executed by the JeM.
The encounter ended after three terrorists were gunned down.
Sources said it was the "Afzal Guru squad" of the banned organisation which has been involved in such attacks.
Khan said the militants broke into the 182 Battalion Camp of the BSF through a fence adjoining a residential area. He said militants cut the fencing between the extension of Defence Colony and Gogoland to enter into the building.
The camp is located just outside the global airport in Srinagar - a heavily fortified area. According to the locals, who live near the BSF camp, said that dozens of loud explosions have rattled entire Humaham and its adjoining neighbourhoods.
Two militants were killed in the gunbattle that is raging near the airport, forcing brief suspension of air traffic and closure of schools in the vicinity.
"Body of one of the terrorists has been found with his identity yet to ascertained", said Director General of Police SP Vaid. The first terrorist was killed at the gate by guards, while second terrorist was killed inside the mess, and the third inside the administration building.
"After sometime CRPF and Budgam police joined the operation". Shortly after their entry, there was heavy barrage of fire and explosions between militants and the security personnel.
"Both of them were eliminated".