Ever since the direct rule was established in Bengal, Bihar and Odisha (1772), the East India Company had to face a most complicated problem, which was how to administer revenue. It was a private trading company, having no knowledge of India especially its revenue or judicial administration. In 1772, Warren Hastings, the Governor-General, leased the right to collect the revenues to the highest bidders for five years. This quinquennial settlement proved to be a failure. At the time of bidding, the zamindars promised to give high revenue, but most of them failed at a later stage.
In 1777, the quinquennial settlement was removed and the system of annual leases was introduced. This further complicated the matter and the fluctuation in the company’s income continued. The annual tenure was also not liked by the British Parliament (dominated by the landlords), which passed an Act in 1784 directing the Court of Directors to abandon the annual system and frame “permanent rules” for raising the land revenue.
Subsequently, in 1786 the Court of Directors urged Lord Cornwallis to make a decennial settlement (ten years settlement) with the zamindars, which was eventually to be declared permanent if it proved satisfactory. From 1786 to 1789, Lord Cornwallis and John Shore, a Bengal civilian who had, it is claimed, some knowledge of land tenure, worked together for a solution. They had three pressing questions between them.
- With whom was the settlement to be made, the zamindars or the actual tillers?
- What should be the state’s share in the produce of land?
- Should the settlement be for a fixed term or permanent?
On the first question, John Shore maintained that the zamindar was the owner of land subject to the payment of annual land revenue to the State. James Grant, the record keeper of company, however, maintained that the state was the owner of all land in the country. In reality, both were ignorant. From the account of Abul Fazal, the court historian of Akbar, it is clear that the land belonged to the tillers as long as they paid taxes. Lord Cornwallis, himself an English landlord, accepted John Shore’s view. He realised that the company does not possess sufficient administrative experience to make a direct settlement with the ryot (peasant). Therefore, Cornwallis decided to make a settlement with the zamindars. Cornwallis also had the support of the Court of Directors.
On the second question, James Grant maintained that the settlement should be made on the basis of the highest Mughal settlement, as was in 1765. Shore, on the other hand, maintained that the settlement should be made on actual collection of the current year. Once again Cornwallis supported Shore’s view and settlement was made on the basis of the actual collections of the year 1790-1791.
On the third question, John Shore and Cornwallis held different views. Shore wanted the settlement to be made effective for ten years but Cornwallis wanted to declare the settlement permanent. Initially, the settlement was made for ten years in 1790, but on March 22, 1793, the settlement was fixed in perpetuity. The Court of Directors once again came in full support of Lord Cornwallis.
Thus, Permanent Settlement was implemented in Bengal, Bihar, Odisha, Banares and Northern part of Tamil Nadu, covering an area of 19 per cent of British India. Under this settlement:
- The zamindars (Landlords) were made the owner of the land as long as they were paying revenue.
- Zamindars were allowed to sell or purchase the land and evict the peasant, in case of non-payment of rent.
- Out of the collected rent, 89% went to the state and the rest 11% to the zamindars.
- The government had no direct relation with the ryots.
Merits of Permanent Settlement
- The government was assured of a fixed income from land revenue. Under Permanent Settlement, the zamindar had to pay the agreed amount, otherwise, the government could realise the arrears by taking away his land. The uncertainty in income was checked.
- The company was saved from the expenses of periodical assessment and Settlements.
- The Permanent Settlement proved advantageous to zamindars in the long run. The increased production went to the zamindar. because the government’s demand was permanently fixed.
- It created a class of loyal people i.e. the zamindars whose economic interests demanded the continuance of the British rule. During the later Mughal period, the zamindars became very powerful. Cornwallis made them politically weak but economically very influential.
Demerits of Permanent Settlement
- The adverse effects of Permanent Settlement were far more long-lasting than the benefits. Following were the demerits of the Permanent Settlement:
- The arrival of new zamindars in the rural areas-Since most of the zamindars failed to deposit land revenue on time, their zamindari right was given to a new zamindar. About fifty per cent landed property in Bengal went to new zamindars between 1793-1815, in twenty-two years only. These new Zamindars were different from the traditional ones. Most of them were urban merchants, who rarely visited the lands, and their agents collected rent. Thus, it created a class of exploiters—absentee landlords and their agents. The zamindars led a luxurious life on hard-earned money of poor peasants. They were ‘distant section pumps’ sucking the wealth of the rural areas and living a life of luxury in the cities, especially in Calcutta. Interestingly, most of them were upper-caste Hindus.
- The poor peasants, to pay rent on time, had to borrow money from Mahajans (money lenders). Till the time of Mughals, these money lenders were mainly living in cities; now the village was a place of big work for them. They gave money on exorbitant interest. Thus, Permanent Settlement made ‘Mahajans’ important in the rural parts of Eastern India.
- The Government of Company was assured of a fixed income, however in the long run it was a loser. The Company continued to receive the same amount till 1947 as it got in 1793, i.e. 3-3/4 million pounds. All the increased or extra income went in the pockets of zamindars.
- Agriculture and economic progress of Bengal, Bihar, and Orissa were affected by the Permanent Settlement. The zamindars, mostly living in urban areas, either had no knowledge about agriculture or never took an interest in the development of land or improving crop pattern.
The peasants, on the other hand, hardly had any means to improve agricultural productivity. They also lost the enthusiasm to work passionately as they knew that their labour was not going to bring happiness in the family, but in the family of zamindars.
The Permanent Settlement benefitted only zamindars and Mahajans. To the government, it benefitted only for a short duration. Most of the misery of ‘rural east’ was due to the Permanent Settlement. Though temporary relief was provided in 1859 through the Bengal Tenancy Act, it mainly benefitted the rich peasants. For the majority of peasants, the relief came only after independence.