The Indian government will set up a panel to consider changes to the country's pension system to be used by both the federal and all state governments, Finance Minister Nirmala Sitharaman said on Friday, seeking to unify the different schemes adopted by the country's ruling and opposition political parties.

"I propose to set up a committee under the Finance Secretary to look into the issue of pensions and evolve an approach which addresses the needs of employees while maintaining fiscal prudence to protect common citizens," Sitharaman said at the lower house of the Parliament.

The approach will be designed for adoption by both the federal and state governments, she added.

Currently, states ruled by the opposition party use an old pension system that provides state-funded, life-long pensions to employees, equivalent to almost half of their salary.

This has led to government employees in other states, particularly those ruled by Prime Minister Narendra Modi's party, protesting to seek higher pensions.

In 2004, the federal government and a majority of states replaced the old scheme with one that was funded through employee and government contributions. (Reporting by Nikunj Ohri; Editing by Savio D'Souza)