THE Government has proposed deciding the size of district boards on a population basis, which could leave the Islands District Board with only three elected members. Under the blueprint formulated by the Boundary and Election Commission (BEC), there would be one member for every 17,464 people, give or take 25 per cent. This means the Islands Board would have three elected members, while Eastern District would have 34 elected seats. The proposals, revealed by BEC chairman Mr Justice Woo, will be gazetted next week for a one-month consultation. But its cost-effectiveness was immediately questioned by legislator Fred Li Wah-ming, of the Meeting Point group. Mr Li, who is also a Kwun Tong District Board elected member, welcomed the application of a population quota in drawing boundaries, but he was concerned that a small district board would not be economical. ''It is a more reasonable way of drawing boundaries than before,'' he said. ''But I'm a bit worried about the small size of some of them, because the resources taken for its operation will be more or less the same.'' He said at present, the estimated expense for a small district board was between $1 million and $2 million and between $5 million and $6 million for a large one. These included administrative costs and back-up facilities. Mr Justice Woo said it was the first time in Hong Kong a population quota had been applied in the demarcation of electoral boundaries. The population in each proposed constituency was determined by reference to the projected district population for 1994 on a ''single-seat, single-vote'' basis.