The money isn't just to process the applicant. It involves the additional cost of, for example, opening up the envelopes, whatever additional costs are involved with processing the actual application.
As registrar, when I came on board, one of the things that fascinated me the most, both as a bureaucrat but also as a registered Indian myself, is the level of work that's often required in terms of doing the research. People send in the application, and hours and days are sometimes required to do genealogical research as well as assessing the individual's application, making sure all the necessary documentation is there.