* Eight victims cremated in Buddhist ceremonies
* Three sherpas still missing, three others injured
* Sherpas demand more compensation, higher insurance (Recasts with sherpa funerals, adds quotes)
By Gopal Sharma
KATHMANDU, April 21 (Reuters) - Nepali families cremated eight Mount Everest sherpas on Monday as anger grew over how much compensation should be paid to victims of the single deadliest avalanche on the world's highest mountain.
The eight bodies, out of a total of 13 recovered at the weekend, were driven through Nepal's capital city in open trucks, their coffins draped in yellow and cream cloth, before being cremated separately.
At one ceremony below Nepal's famous Swayambhunath religious complex, relatives weeped for their loved ones as four bodies were set on fire while Buddhist monks beat drums, crashed cymbals, blew pipes and chanted prayers.
Vern Tejas, a member of the Seattle-based Alpine Ascents hiking group, turned out to pay his respects after five sherpas working with his group died in the avalanche.
"We are here today to express condolences as well as my mourning for their loss. They were not only employees. They were dear friends," said Tejas, dressed in black glasses, hat and shirt. "Without them we can't climb this mountain. Right now we are stunned and in a state of deep grief."
At least 13 guides were killed, three are missing and at least three others are under intensive care for broken limbs, ribs, blood clots and other injuries in Kathmandu hospitals after an avalanche swept the Khumbu Icefall, one of the most dangerous parts of the climb to Everest.
The men were trying to fix ropes and crack snow and ice to carve out a route for foreign climbers through the icefall, located not far above Everest Base Camp, when they were caught in the avalanche.
The accident has re-ignited debate on the risks sherpas take and on overcrowding on Everest. The number of fatal accidents has risen in the past decades as more and more commercial expeditions - the government has issued 334 permits this season, up from 328 last year - are launched.
After meeting at the base camp of the 8,850-metre summit on Sunday, sherpas with 31 foreign expeditions demanded $10,000 in compensation for the families of victims, a doubling of insurance cover for climbs, and agreed to launch protests if their demands were not met.
Ed Marzec, a 67-year old climber who was at the base camp, told Reuters that 350 of the sherpas had voted to suspend their work helping climbers on Everest, although this could not be independently verified.
The government has announced an immediate payment of $400 to the victims' families to cover funeral costs.
But there is no provision for compensation for sherpas who are hired by international expeditions to carry gear, and in the past these groups have provided financial assistance on their own in the case of accidents.
Deputy Prime Minister Prakash Man Singh, who placed marigold garlands over the eight coffins driven through Kathmandu, declined to say whether the government would meet the sherpas' demands for greater compensation.
"The government is positive about their demands. But the concerned (tourism minister) will come up with his recommendations on the demands for the consideration of the government," he told Reuters.
Besides the cash compensation, the mountain guides have demanded that the government pay for the treatment of the injured and raise the insurance cover to $20,000.
"If the demands are not met, we will be forced to launch strong protests for the sake of daily bread of the entire sherpa community," the sherpas said in a statement.
It was not clear what form the protests might take if the demands were not met. Some guides had asked for the mountain to be closed to expeditions during the popular climbing season that runs through May this year as a mark of respect for the dead.
Guiding foreign climbers is the main livelihood for sherpas, helping them make up to $5,000 a year in a country with an average annual income of just over $700.
Ang Tshering Sherpa of the Nepal Mountaineering Association said the guides had given the government seven days to fulfill their demands.
"There is a situation of conflict up in the mountain. It is serious and could have far reaching consequences for climbing in Nepal," he said. "So the government must act on their demands immediately." (additional reporting by John Chalmers; writing by Tommy Wilkes; Editing by Sanjeev Miglani and Tom Heneghan)