The end of the three month basic training in the Singaporean army is marked by Passing Out Parade called POP for short. The night before POP it is traditional for everybody to muck about like they throw powder around, have water fights, even the commanders join in for fun, we just go a bit nuts like running along our corridors throwing powder at each other.
Manoj experienced this just a few months ago when he completed basic training. Like many pranks played when graduating or moving on to further endeavors, the fun is harmless and is sometimes enjoyed by superiors. The recruits are in a liminal period, they are about to enter the army, air force or navy and like going to college, will be separated from some of their close peers. Unlike high-school, basic training camp is a lot more serious, and a much higher level of responsibility is held by the individuals, not only to themselves but to the whole country. Due to this, the pranks and release of tension are usually somewhat more explosive and boisterous. Also the pranks arent usually committed on peers, but rather the superiors.
Having water fights and such also allow the recruits to enjoy themselves in a manner that is usually reserved for serious matters; a water fight with trained soldiers just isnt the same as one with a bunch of high school kids. Also one cant help but draw the parallel a water fight has to a real gun battle.
While I have no personal experience in relation to the military I can relate to the need to have fun after accomplishing something. A fulfilling manner to celebrate in would be exactly as Manoj described it, to go crazy. Although, I never did manage to find out why the recruits threw around powder!