73rd and 74th Constitutional Amendment Acts passed by Parliament in year 1992 are important milestones for development of Local Bodies in the Country. They granted constitutional provisions to Local bodies.

In pursuance of Article 243-I of the Constitution of India read with Article 243-Y thereof and section 3 and 8 of the Odisha Finance Commission (Miscellaneous Provisions) Act, 1993 (Odisha Act 28 of 1993), Honorable Governor of Odisha constitutes State Finance Commission in every five years to review the financial position of Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) in the state. It ensures the fair allocation of financial resources between the State Government and Local Bodies.