The Company becomes the Diwan
On 12 August 1765, the Mughal Emperor appointed the East India Company as the Diwan of Bengal. As Diwan, the Company became the chief financial administrator of the territory under its control. Now it had to think of administering the land and organising its revenue resources in a way that could yield enough revenue to meet the growing expenses of the company and had to ensure that it could buy the products it needed and sell what it wanted.
Being an alien power, the company needed to specify those who in the past had ruled the countryside, and enjoyed authority and prestige. Those who had held local power had to be controlled, but they could not be entirely eliminated.
Revenue for the Company
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Though the Company had become the Diwan. But it still saw itself primarily as a trader. It tried to increase the revenue as much as it could and buy fine cotton and silk cloth as cheaply as possible. Within five years the value of goods bought by the Company in Bengal doubled. The revenue collected in Bengal was used to finance the purchase of goods for export.
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Because of the policies followed by the British, Bengal economy was facing a deep crisis. Artisans deserted villages since they were being forced to sell their goods to the Company at low prices. Peasants were unable to pay the dues that were being demanded from them. In 1770 terrible famine killed ten million people in Bengal. About one-third of the population was wiped out.
The Need to Improve Agriculture
Most Company officials began to feel that investment in land had to be encouraged and agriculture had to be improved. The Company finally introduced the Permanent Settlement in 1793. By the terms of the settlement, the rajas and taluqdars were recognised as zamindars.
They were asked to collect rent from the peasants and pay revenue to the Company. The amount to be paid was fixed permanently, that is, it was not to be increased ever in future. Since the revenue demand of the state would not be increased, the zamindar would benefit from increased production from the land, hence zamindar would encourage and improve the land cultivation.
The Problems
Permanent settlement however created problems for Company as well as for zamindars and tenants.
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Company officials soon discovered that the zamindars were in fact not investing in the improvement of land. The revenue that had been fixed was so high that the zamindars found it difficult to pay. Anyone who failed to pay the revenue lost his zamindari.
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By the first decade of the nineteenth century the prices in the market raise and cultivation slowly expanded. The income of the zamindars increased but no gain for the Company since revenue demand it could not increase a revenue demand that had been fixed permanently.
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The zamindars now saw the possibility of earning without the trouble and risk of investment. As long as the zamindars could give out the land to tenants and get rent, they were not interested in improving the land.
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In the villages, the cultivator found the system extremely oppressive. The rent he paid to the zamindar was high and his right on the land was insecure. To pay the rent he had to often take a loan from the moneylender and if he failed to pay the rent he lost his land.
A New System is Devised
By the early nineteenth century many of the Company officials were convinced that the system of revenue had to be changed again. In the North Western provinces of the Bengal Presidency an Englishmen called Holt Mackenzie devised the new system in 1822.
Under his directions collectors went from village to village, inspecting the land, measuring the fields and recording the customs and rights of different groups. The estimated revenue of each plot within a village was added up to calculate the revenue that each village (mahal) had to pay.
This demand was to be revised periodically, not permanently fixed. The charge of collecting the revenue and paying it to the Company was given to the village headman, rather than the zamindar. This system came to be known as the mahalwari settlement.
The Munro System
In the British territories in the south a new system was devised that came to be known as the ryotwar (or ryotwari). It was tried on a small scale by Captain Alexander Read and was subsequently developed by Thomas Munro. Read and Munro felt that in the south there were no traditional zamindars. The settlement had to be made directly with the cultivators (ryots) who had titled the land for generations. Munro thought that the British should act as paternal father figures protecting the ryots under their charge.
All Was Not Well
Within a few years after the new systems were imposed it was clear that all was not well with them. Revenue officials fixed too high a revenue demand. Peasants were unable to pay, ryots fled the countryside. Villages became deserted in many regions.
