The government is standing firm in its refusal to extend equal pensions and settlement rights to all Gurkhas.

The announcement comes after hundreds of ex-Gurkhas protested outside the Houses of Parliament last month against their “unfair” treatment.

They included around 100 former Gurkha soldiers who travelled to the capital from Aldershot and Farnborough.

The following week, Gurkha leaders were summoned to a meeting in London, attended by representatives from the Ministry of Defence, the Home Office and the Nepalese Embassy.

Chhatra Rai, general secretary of the British Gurkha Welfare Society, which is planning a legal challenge to the government’s position, said the message was discouraging.

“It is a very disappointing response,” Mr Rai said, “but all the ex-Gurkha groups were not holding our breath. All our hopes are now pinned on the legal route.”

A spokesman for the MoD said: “Our position is the same and we are not going to change our position on pensions. The Prime Minister made that clear last week. Our position with the July 1, 1997 date is still in place and that remains.”

The decision relates to both the government’s settlement and pension policies, the spokesman said.

Former Gurkhas are angry at rules that discriminate against those who retired from the Army before July 1, 1997 — the date of the hand-over of Hong Kong from Britain to China.

The government has said this date represents when the Brigade of Gurkhas changed from an “overseas” to a UK-based force, although soldiers’ roles have remained the same.

All Gurkhas are recruited in Nepal and are discharged there.

The government says pension levels for pre-1997 retirees, at around £1,000 a year for a soldier with 15 years’ service, are fair for Nepalese standards of living. British-born soldiers with a similar level of service receive around six times as much.

At the protest, around 50 ex-Gurkhas decided to return their British service medals to the government as an act of protest.

The protestors gave their medals to Liberal Democrat leader Nick Clegg in a leather-bound box, who later handed it to Prime Minister Gordon Brown. Mr Clegg took the opportunity to question Mr Brown in the Commons on the issue, calling it a “national disgrace” that the Gurkhas were still discriminated against.

Gyan Sherchan, of Aldershot Road, Ash, was one of those prepared to hand back his long service and good conduct medals.

Mr Sherchan, originally from Syaulibang in west Nepal, followed his eldest brother into the Brigade of Gurkhas in 1978.

Specialising as a chef, he reached the rank of warrant officer and served for 29 years, including stints in Hong Kong, Brunei and the Falklands, as well as at Church Crookham. He eventually retired in 2007, spending his last 12 years as an instructor in Aldershot.

While a British-born former soldier with his service would receive a pension of around £16,000 a year, under the current Gurkha Offer to Transfer scheme (GOTT), hailed as the government last year as a fair deal for pensioners, he would receive less than half that figure.

Mr Sherchan added that a British soldier of the same rank would receive a one-off payment of up to £60,000, none of which is available to Gurkhas.

“It is not fair,” the 48-year-old said. “Our service was no different from the service of anyone else in the Army.

“Many Gurkhas fought in wars alongside British soldiers before 1997, in the Falkland Islands, the Gulf War and in other countries.

“We wore the same uniform and had the same conditions. We were happy to serve equally, so let us have the same entitlements and equal rights.”

Mr Sherchan said he was “very proud” to have won his medals, showing his unblemished service record for the UK, but he added that he was prepared to hand his hard-won decorations back.

“If I wear these medals on my chest, I feel proud and the British public feels proud. They feel ‘he is a British soldier’. But I am hurting inside my heart because I am not treated as a British soldier, so my medals are meaningless.

“The government has recognised my service with medals, so the MoD should recognise our service fully and treat us equally.”

Jagatbahadur Limbu, from Station Road, Aldershot, retired in 1992 after 15 years’ service. Because he retired before 1997, he received less than £100 a month pension.

He cannot work in the UK because his working visa to stay here has been refused, and he is facing an appeal on his immigration status later this month. If his appeal is turned down, he could be forced to leave the country.

Mr Limbu has two sons, one of whom has already joined the Gurkhas and would therefore qualify for equal pay and settlement rights, while his father cannot. His wife and younger son are still in Nepal.

“All I want is to make a better life for my son,” he said.

To read the Nepalese version of this article click here.