The Permanent Settlement, Sthayi Bandobast in Hindi, and also known as the Permanent Settlement of Bengal, was an agreement between the East India Company and Bengali landlords. It was applied to fix the revenue with far-reaching consequences for both agricultural methods and productivity in the political facts of the entire British Empire and the Indian country.
This constituted a part of a larger body of legislation, known as the Cornwallis Code. The Cornwallis Code of 1793 divided the East India Company’s service staff into three branches:
- Judicial and
Revenue was collected by Zamindars, native Indians who were landowners. This division created an Indian landed class that supported British authority.
It was first in Bengal and Bihar and later in the south district of Madras and Varanasi. This system finally spread throughout North India by a series of rules dated 1 May 1793. These rules remained in force until the Charter Act of 1833. The other two systems common in India were the Ryotwari system and the Mahalwari system.
Need for Permanent Settlement
Previously, zamindars in Bengal, Bihar, and Odisha were officials who were empowered to collect revenue on behalf of the Mughal emperor and his representative, the Diwan in Bengal. The Diwan supervised the zamindars to assure that they were neither soft nor strict.
When the East India Company was awarded the Diwani or suzerainty of Bengal after the Battle of Buxar in 1764, they found himself inferior to trained administrators, especially familiar with local customs and law.
As a result, the landholders were made uneducated or reported to corrupt and lazy officials. As a result, revenue was obtained regardless of future income or local welfare.
After the unfortunate famine of 1770, which was partly due to this scarcity, the company officials in Calcutta better understood the importance of the failure of revenue officials. Warren Hastings, the then Governor-General, introduced a system of five-yearly inspection and temporary tax farmers.
Due to several reasons, they did not want to take direct control of villages. The main reason was, they did not want to offend those who had traditionally enjoyed power and prestige in rural Bengal.
The company failed to consider the question of incentivization. During the period of inspection, many appointed farmers flee. The British Parliament noted the harmful results of the system. In 1784, British Prime Minister William Pitt Young directed the Calcutta administration to change it immediately. In 1786, Charles Cornwallis was sent to India to improve the company’s practices.
A permanent settlement for Bengal was first proposed in 1786 by the East India Company Court of Directors. It was an attempt to increase the taxation of zamindars.
Between 1786 and 1790, the new Governor-General Lord Cornwallis and Sir John Shore (later Governor-General) entered into a heated debate with zamindars about the introduction of a permanent settlement. Shore explained that native zamindars would not rely on permanent settlements and that it would take time before they became real.
Objective Of Permanent Settlement
The main objective of the permanent settlement was to solve the problem of agrarian crisis and distress resulting in reduced agricultural production. British officials thought that the resources of agriculture, trade, and state revenue could be increased by agriculture. For this, a permanent settlement was introduced which fixed the revenue secured the property rights.
Britishers thought that there would be a regular flow of tax income if they permanently fixed the revenue demands of the state. Additionally, if the rate of tax is fixed, landowners can invest the surplus in their agricultural lands.
The British authorities thought that such a process would lead to the rise of the wealthy class of farmers and wealthy landowners, who would generate more profit by investing their capital. This newly emerging class would be loyal to the British, who were still achieving a position in the Indian subcontinent.
While the policy was well thought out, it failed to identify individuals who were prepared to contract to pay permanent revenue and invest in the improvement of agriculture. After much discussion and disagreement among the authorities, a permanent settlement was reached with the existing kings and talukdars of Bengal, who were now classified as zamindars.
They had to pay fixed revenue forever. Thus, zamindars were not the landowners but rather revenue collector agents of the State. Cornwallis believed that they would accept it immediately and therefore start investing in improving their land. In 1790, the Court of Directors issued a ten-year (controversial) settlement to the zamindars, which was made permanent in 1793.
By the Permanent Settlement Act of 1793, their power to keep the armed forces was withdrawn. They remained the only tax collectors of the land. Was greatly weakened as it was now banned to keep him in any court, as it was brought under the supervision of a company-appointed collector. British officials believed that investing in the land would improve the economy.
The system failed in the long run due to operational hardship as well as a permanent settlement because the permanent settlement did not take into account the seasonal and uncertain nature of Bengali agriculture.
The company did not understand the structural issues as well as society.
With the question of incentives now being considered central, the tenure of landlords was guaranteed security. In short, former landowners and revenue intermediaries were granted ownership of the land they held. The small owners were no longer allowed to sell their land, but could not be evicted by their new landlords.
The zamindars’ incentives were to encourage the improvement of land, such as drainage, irrigation, and construction of roads and bridges; Such infrastructure was inadequate in most parts of Bengal.
With a fixed land tax, the zamindars can safely invest in increasing their income, without any fear that the tax will be increased by the company.
Cornwallis made the motivation clear by declaring that “when the government’s demand is fixed, an opportunity is afforded to landowners by the improvement of their land, to increase their profits”.
The British, in their own country, took into account “coke reformers”, such as the Coke of Norfolk. The Court of Directors also hoped to guarantee the company’s income, which was prone to frequent defaulting landlords who had fallen into arrears, making it impossible for them to properly budget their spending.
The immediate result of the permanent settlement was both sudden and dramatic, one that no one had imagined. By ensuring that the landlords’ lands were permanently blocked and with a fixed tax burden, they became desirable items.
Furthermore, the government’s tax demand was inflexible, and collectors of the British East India Company refused to make allowances for times of drought, flood, or another natural disaster. At that time, the demand for tax in England was more than this. As a result, many landowners immediately fell into arrears.
The Company’s policy of auctioning any zamindari land is considered to be outstanding, which was not present. Many of the new buyers of this land were Indian officials within the government of the East India Company.
Bureaucrats were ideally placed to buy land they undervalued and were therefore profitable. Also, their status as officers allowed them to obtain the necessary funds to purchase land. They could manipulate the system to bring in sales land that they specifically wanted.
Historian Bernard S. Cohn and others have argued that the Permanent Settlement led to a commercialization of land that previously did not exist in Bengal and, as a consequence, it led to a change in the social background of the ruling class from “lineages and local chiefs” to “under civil servants and their descendants, and to merchants and bankers”. The new landlords were different in their outlook; “often they were absentee landlords who managed their land through managers and who had little attachment to their land”.
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