There has also to be adequate representation for Scheduled Caste and Scheduled Tribe members. At least a third of the total elected membership of local governments is to be women. Additionally, the state legislations may reserve the post of chair-persons for women as well as reserve seats for the backward classes.
The functions allotted to the panchayats cover 29 subjects, while those for the nagarpalikas cover 16. This means that the panchayats will have largely concurrent functional responsibilities. In keeping with the imperatives of economic liberalisation local governments are expected to privatise their market-related services and encourage non-governmental organisations and Community Based Organisations (C.B.O) to provide social services. This would result in a variety of public-private collaborations in the provision of community services and the involvement of local governments in public service delivery arrangements. The Act provides for a mandatory appointment of State Finance Commissions (SFCs) every five years. There should be a common commission for both the panchayats and the nagarpalikas and for a group of states.
The SFCs are required to assess local government revenues from their own sources and recommend a package of revenue devolution and grants from the State Government to meet their projected fiscal gap in terms of an estimated level of local expenditure.