In a surprising and controversial move, the Himachal Pradesh government recently announced a proposal to impose commercial rates for electricity and water on homestays. This decision was revealed in various news outlets indicating that a proposal to provide electricity and water facilities in the state’s homestays at commercial rates has been placed before the Cabinet Sub-Committee constituted to amend the Home Stay Rules 2024.
For years, homestays have been a lifeline for middle-class and lower-income families, providing a vital source of supplementary income and contributing to the local economy. However, this new policy threatens to undermine the very foundation of homestays, turning what was once an accessible and inclusive form of tourism into a financially burdensome endeavour. The government argues that aligning utility rates with commercial standards is necessary for regulatory consistency and financial sustainability. However, this rationale fails to consider the unique nature of homestays, which operate on a small scale and offer tourists an authentic, home-like experience rather than a commercial service. The proposal raises critical questions about economic inequality, property rights, and the future of sustainable tourism in Himachal Pradesh. In this blog, we will delve into the multifaceted implications of this proposal, examining how it stands to impact local livelihoods, exacerbate economic disparities, and contradict the very principles of the Incredible India scheme.
“Poor naked wretches, whereso’er you are, that bide the pelting of this pitiless storm, how shall your houseless heads and unfed sides, your looped and windowed raggedness, defend you from seasons such as these?”
— King Lear, Act 3, Scene 4
The Core Stakeholders
The prime beneficiaries and stakeholders of the homestay scheme are the middle-class, lower-class, housewives, and unemployed youth. This initiative serves as a crucial source of livelihood and supplementary income for these groups. Most of the homestays they operate are managed in a non-commercialized manner, typically having 2-3 rooms and less than 6 rooms as per the incredible India guidelines (Note: the blog is not referring to those units that are running more than 6 rooms or are in violation of guidelines). These units do not operate year-round, lack staff, and are directly managed by the residents. Unlike hotels, which maintain large staffs and operate continuously, homestays often close when residents go on vacation, fall ill, or have private guests.
Treating homestays and hotels alike is inherently discriminatory. Applying the same parameters to a small-scale homestay with fewer than 6 rooms and a hotel with 40-50 or more rooms is an unfair practice that fails to recognize their fundamental differences. This approach will lead to the closure of many homestays, benefiting only the already wealthy hoteliers, and adversely impacting the middle class, poor, unemployed, and housewives. The state has a duty to uplift this group rather than impose measures that threaten their livelihood.
The government has expressed its intention to take stricter measures against homestays operating in violation of the rules, particularly those with more than 6 rooms that are run in a commercialized manner. Though crack down on illegal homestays is a laudable step and even the genuine homestays support this endeavour. However the Government needs to understand that this is an implementation issue and not a flaw in the homestay policy, which rightly treats establishments with fewer than 6 rooms as non-commercialized. Cracking down on illegal homestays cannot be done by impacting genuine homestays. Creating the same regulations for both large hotels and small homestays is not the solution for curbing illegalities committed by some. Instead, these issues can only be addressed through better implementation of existing rules and effective ground checks. This proposed approach is akin to throwing the baby out with the bathwater and will not solve the problem. In fact, it will likely drive genuine homestay owners to either shut down or be in violation of the rules.
Homestays: A Vital Economic Equalizer
The introduction of homestays has democratized the benefits of tourism, allowing more people to participate in and benefit from this growing industry. This trend has been particularly beneficial in rural and less developed areas, where traditional employment opportunities are limited.
The Financial Burden of Commercial Utility Rates
Imposing commercial rates for electricity and water on homestays would significantly increase the operational costs for these small-scale enterprises. Most homestay owners operate on tight budgets, and the additional costs could make it financially unsustainable for them to continue. Unlike large hotels, homestays do not have the pricing power to absorb such cost increases without passing them on to their guests, making them less competitive.
This move threatens to force many homestay owners to shut down their operations, leading to a loss of income for families who rely on this revenue to support their livelihoods. In a state where unemployment is already a pressing issue, reducing opportunities for self-employment and entrepreneurship in the tourism sector will have severe socio-economic repercussions.
Exacerbating Economic Inequality
Homestays have emerged as a crucial economic equalizer in the tourism sector. Unlike large hotels, which require substantial investment and are typically owned by wealthy individuals or corporations, homestays offer a low-cost entry point for middle-class and lower-income families. By opening their homes to tourists, these families can earn supplementary income, which helps improve their financial stability and contributes to the local economy.
The proposal to impose commercial utility rates on homestays stands to exacerbate existing economic inequalities. Wealthy hoteliers, who have long dominated the tourism industry, are likely to benefit from this policy change, as it creates an uneven playing field that disadvantages small homestay owners. While hoteliers can absorb or circumvent such policy changes, small-scale entrepreneurs cannot, leading to increased economic disparity.
This move also undermines the progress made in promoting inclusive and sustainable tourism. Homestays have provided a much-needed opportunity for middle-class and lower-income families to participate in the tourism industry, contributing to social and economic equity. By imposing additional financial burdens on these families, the government is widening the wealth gap and undermining efforts to promote fair and inclusive economic growth.
Infringement on Property Rights
The right to property is a fundamental human right protected under the Constitution of India. Homestay owners are using their private residences to supplement their income, which should be seen as an extension of their property rights. Imposing commercial rates on utilities infringes upon these rights and disregards the legal and constitutional protections afforded to property owners.
The Role of Government in Promoting Economic Equity
The government’s primary responsibility should be to foster economic opportunities and reduce inequality. By proposing measures that disproportionately affect homestay owners, the government is failing to support the economic interests of middle-class and lower-income groups. Instead of imposing commercial rates, the government should look for ways to support and encourage homestay owners, recognizing their role in promoting inclusive and sustainable tourism.
Homestays provide a pathway for upward social mobility, allowing individuals from modest backgrounds to improve their economic standing. By increasing operational costs through commercial utility rates, the government is creating barriers that hinder social mobility and contradict the principles of social equity and fairness.
Inconsistency with the Incredible India Scheme:
- The Incredible India Bed and Breakfast Scheme of the center, and the Himachal Pradesh Home Stay Scheme-2008, was designed to promote tourism by providing tourists with an authentic cultural and local experience. This scheme recognizes the non-commercial nature of homestays. Imposing commercial utility rates contradicts the very essence of these schemes and the objectives of promoting inclusive and sustainable tourism. Further, nothing has changed since these schemes were introduced to warrant such harsh measures by the State Government.
- Classifying homestays as commercial activities contradicts the objectives of the Incredible India Scheme. Such classification would deter locals from participating in the scheme, undermining the government’s efforts to promote inclusive tourism and regional development.
- The scheme itself provides several incentives such as tax exemptions and minimal regulatory burdens to encourage homeowners to participate. These incentives are typically not extended to purely commercial establishments, underscoring the non-commercial nature of homestays.
- It is ethically important to allow local residents to benefit from tourism in their regions. Denying them the opportunity to host tourists in their homes while allowing larger commercial entities to dominate the market creates an unfair economic disparity.
- Homestays promote a more equitable distribution of tourism revenue, ensuring that the economic benefits reach the grassroots level.
“The rich get richer and the poor get poorer.”
— As You Like It, Act 2, Scene 7
Benefiting only the Hoteliers:
It appears that the proposal to impose commercial rates on homestays benefits hotel industry. Unlike homestays, hotels operate on a larger commercial scale and have different economic dynamics. This move seems to favor hoteliers by creating an uneven playing field and potentially driving homestays out of the market, which is unjust and discriminatory. Hotels run restaurants and have no limit on a number of rooms, some running more than 100 rooms, in comparison, homestays have less than 6 rooms hence, the two cannot compete and be measured with the same yardstick of applying commercial rates. Unlike large hotels, homestays do not have the pricing power to absorb such cost increases without passing them on to their guests. This would make homestays less competitive compared to hotels, leading to a potential loss of customers and revenue.
Legal and Judicial Precedents:
Homestays should not be considered a commercial activity because they operate on a small scale and provide a personalized, culturally immersive experience that differs fundamentally from traditional commercial hospitality services. According to the Himachal Pradesh High Court’s judgment, the primary purpose of homestays is to promote tourism by offering tourists an opportunity to live as part of a local family, sharing in their daily life, traditions, and customs. This non-commercial intent is reflected in the Incredible India Bed and Breakfast Scheme and the Himachal Pradesh Home Stay Scheme-2008, which emphasize the provision of a homely environment and cultural exchange rather than profit-driven accommodation services. The court also highlighted that the activity carried out by homestay owners does not constitute commercial activity, as it does not involve significant capital investment or commercial transactions but rather fosters inclusive social interaction and cultural enrichment.
Conclusion
The proposal to charge electricity and water at commercial rates for homestays is a misguided policy that threatens to undermine the progress made in promoting inclusive and sustainable tourism in Himachal Pradesh. This move will exacerbate economic inequality, infringe upon property rights, and contradict the objectives of the Incredible India scheme. The government should support and encourage homestays, recognizing their unique role in democratizing tourism benefits, preserving cultural heritage, and providing economic opportunities for middle-class and lower-income families.
Homestay owners across the state must unite to oppose this proposal and advocate for policies promoting fair and inclusive economic growth. The government must reconsider this proposal and work towards fostering an environment that supports local communities’ livelihoods and ensures the tourism sector’s sustainability.
LawUmbrella 