Sergeant Balaram Rai, 35, died on Monday with his British commander Lieutenant Gareth Evans, while clearing unexploded Nato bombs from a school west of Pristina.

A Nepalese body representing former Gurkhas, the Gurkha Ex-Servicemen Organisation (GAESO), said the UK was breaking a 1947 agreement by deploying Gurkhas in Kosovo.

Sgt Rai: "High flier" who died in Kosovo

"Under the 1947 tri-partite agreement between Nepal, India and Britain on Gurkha recruitment," it said on Thursday, "the Gurkha soldiers should not be used in internal conflicts like in Kosovo".

It added: "The British Government commissions Gurkha soldiers along with British soldiers in dangerous situations, but when the question of gratuity, pension and salary on a par with British soldiers comes up, we are discriminated against."

It urged the Nepal government to take up the issue, and called on Britain to stop such "discriminatory treatment".

Family calls for help

The Ministry of Defence denied the GAESO claims. It said the conflict was "international, not internal", and added that it "utterly refutes suggestions we are using the Gurkhas as some sort of cheap labour".

About 700 Gurkhas are currently serving in Kosovo

A spokesman told BBC News Online: "While we want to stress that money can in no way compensate for the loss of a loved one...Sergeant Rai's family will be well-provided for."

Sgt Rai, who had served with the Gurkhas for 12 years and was described by seniors as a "high-flier", leaves a 30-year-old wife, Asanti, a six-year-old son and a daughter aged four, plus two ageing parents whom he also supported.

His father, Bhimsoor Rai, 61, said on Thursday that he was proud of his son, but his immediate concern was providing for the two children and their mother.

"We implore the British Government to make the necessary arrangements to bring up his two children and provide them with a proper education, so they can look after their mother in the years ahead," he said.

The MoD said Mrs Rai will be given an immediate lump sum as compensation, plus a pension.

However, because it takes into account the cost of living in Nepal, the lump sum will be just £19,092, compared with £54,000 for a non-Gurkha soldier of equivalent rank and length of service.

And the pension, of £939.24 a year for the first five years, followed by £771.48 a year after that, will be just 7.5% of the £15,192 pension that the widow of an equivalent British soldier would receive.

Pay 'approximately the same'

"That 7.5% figure is an easy one to come up with," said the MoD, "but bear in mind that the cost of living in Nepal is £175 per capita per annum". The World Bank puts Nepalese income per capita at about 5% of the UK.

The Ministry of Defence said that Gurkha pay is worked out on a complex formula dating back to the 1947 agreement, which ruled that basic pay for British Gurkhas should be the same as that of those serving with the Indian Army.

However, the MoD takes into account the high cost of living in Britain for the Gurkhas, who are now all based in the UK.

Food and accommodation is supplied, and Gurkhas do not pay national insurance, so "pay is approximately the same as that of a UK serviceman".

The Gurkhas began fighting for the British during the Anglo-Nepal War of 1814-16, after British troops failed to conquer their fighters and each side won the grudging respect of the other.

More than 700 Nepalese Ghurkas are currently in Kosovo, with about 100 involved in the hazardous mine-clearing operation.

Sergeant Rai and Lieutenant Gareth Evans were both of the 69th Gurkha Field Squadron, part of the 36th Engineer Regiment based at Maidstone, Kent.

Their regiment was among the first Nato troops to enter Kosovo as part of the international peacekeeping force K-For.