Permanent Settlement: Land Revenue Systems in British India

Permanent Settlement: Land Revenue Systems in British India

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Pre-British Agrarian Structure

• In the pre-capitalist stage of the Indian economy, the idea of absolute ownership of land did not exist — all classes connected with the land possessed certain defined rights.
  • The cultivator held the right to cultivate and enjoyed security of tenure, on condition of paying a more or less fixed share of the year’s produce to the overlord.
  • The Patil, or village headman — who also acted as collector, magistrate, and head farmer — passed on the state’s demand for land revenue (which varied from one-sixth to one-third of the rental value) to the ruler.
  • Internal village arrangements — such as allotting particular categories of land to particular categories of cultivators, providing irrigation facilities, and allocating and collecting land revenue from individual cultivators — were settled by the Patil, in consultation with the village panchayats, according to local customs and practices.

British Land Revenue System and Administration

• The British sought to derive the maximum economic advantage from their rule in India.
  • British industrial and mercantile interests, by advocating Free Trade principles, prevented the East India Company from raising substantial revenue through high customs tariffs.
  • The Company’s government in India therefore had to rely on land revenue as its principal source of state income — making land revenue matters a central concern of the new colonial rulers.
• Early British administrators of the East India Company treated India as a vast estate, acting on the principle that the Company was entitled to the entire economic rent, leaving cultivators merely the expenses of cultivation and the wages of their labour.
  • Village communities were disregarded, and in almost all parts of the Company’s territories, early administrators resorted to the “farming” of land revenues.
• These excessive land revenue demands proved counterproductive: agriculture began to languish, large areas fell out of cultivation, and famines stared the people in the face.
  • This necessitated serious thinking, both in India and England, about land revenue matters — from which several policy decisions eventually emerged.

New Land Tenures

• The English adopted three main types of land tenure in India: the Zamindari tenure, the Mahalwari tenure, and the Ryotwari tenure.

Permanent Zamindari Settlements

• These were made in Bengal, Bihar, Orissa, the Benares Division of the U.P., and the Northern Carnatic, covering roughly 19 per cent of the area of British India.

Mahalwari Settlements

• Introduced across major portions of the U.P., the Central Provinces, and the Punjab (with variations), covering nearly 30 per cent of the area.

Ryotwari Settlements

• Made in major portions of the Bombay and Madras Presidencies, in Assam, and in some other parts of British India, covering roughly 51 per cent of the area.

Land Revenue System during the Dual Government in Bengal

• In 1765, following the Battle of Buxar, the East India Company obtained the right of Diwani — the right to collect revenue for Bengal, Bihar, and Orissa — through the Treaty of Allahabad, granted by the Mughal Emperor Shah Alam II.
  • Since the grant of Diwani in 1765, the primary concern of the Company’s administration in India was to collect as much revenue as possible.
  • Since agriculture formed the main basis of the economy and the chief source of income, several land revenue experiments were introduced in haste to maximise extraction — even as the nawabi administration was retained, with Muhammad Reza Khan acting as Naib Diwan for the Company.
• The nawabs collected revenue from the zamindars, some of whom were large landlords controlling extensive areas with their own armed retainers.
  • By 1790, just twelve big zamindari houses were responsible for paying over 53 per cent of Bengal’s land revenue assessment.
  • Others were smaller zamindars, who paid revenue either directly to the state or through the bigger zamindars.
  • Peasants undertook cultivation and paid the zamindars at customary rates — rates that varied from subdivision to subdivision, and were sometimes supplemented by extralegal charges known as abwabs.
• Clive and his successors continued this traditional system of revenue collection, even as they increased the amount to be collected — from Rs 81,80,000 in 1764 to Rs 2,34,00,000 in 1771.
  • Revenue was collected through land tax collectors, or zamindars, who deducted their commission — about 10 per cent of the total collected amount — before depositing the balance in the Company’s treasury.
  • Although native officials handled collection, European officers of the Company held supervisory authority over them; their corruption, coupled with a poor understanding of local conditions, led to the complete disorganisation of the agrarian economy and society across the diwani provinces within just a few years.
• The East India Company and its officials increased their revenue demand every year from the collectors, who, in turn, increased their own demands on the peasants.
  • The peasants were thus the worst sufferers — many abandoned their lands and turned to dacoity and robbery.
  • The devastating famine of 1769–70, which wiped out roughly one-third of Bengal’s population, was but one indication of the prevailing chaos.
• The Company’s directors, unable to pay their shareholders the expected dividends, searched for reasons behind falling revenues and the devastation of famine.
  • They found an easy “scapegoat” in Reza Khan, arrested on false charges of corruption and embezzlement.
  • The real reason for his removal, however, was Warren Hastings’s desire, as the newly appointed Governor of Bengal, to remove Indians altogether from revenue administration and make the British the sole controllers of the province’s resources.

Farming System (Ijaradari System)

• In 1772, Warren Hastings introduced the Ijaradari (farming) system in Bengal.
  • After securing Diwani rights directly, Hastings auctioned the right to collect revenue to the highest bidders — European District Collectors were placed in charge of overall revenue collection, while the actual right to collect was farmed out to these bidders.
  • It began as a five-year settlement, and was subsequently made an annual settlement in 1777.
• Although the periodicity of these settlements was experimented with repeatedly, the farming system ultimately failed, as revenue farmers tried to extract as much as possible from the peasantry with no concern for the underlying production process.
  • The burden of revenue demand on peasants grew so onerous that it often could not be collected at all.
  • Warren Hastings appointed the Amini Commission — the first commission of its kind in British India — in 1776, to inquire into the real value of land; it submitted its report in 1778.
• The Ijaradari system ultimately failed for several reasons:
  • it introduced instability into the Company’s revenue at a time when the Company was hard-pressed for money;
  • neither the ryot nor the zamindar had any incentive to improve cultivation, since neither knew what the next year’s assessment would be, or who the next year’s revenue collector would even be; and
  • the Company’s administration had thoroughly confused the situation by retaining some zamindars while replacing others with new revenue farmers (ijaradars) — even old customary assessment rates were disregarded, leaving complete confusion prevailing by the time Cornwallis arrived.
• The net outcome of this entire period of rash experimentation was the ruination of the agricultural population.
  • In 1784, Lord Cornwallis was accordingly sent to India with a specific mandate to streamline revenue administration.

Zamindari Settlement / Permanent Settlement

Background

• Both the dual government’s revenue system in Bengal (1765–72) and the subsequent Ijaradari settlement (introduced by Warren Hastings in 1772) had failed, leaving the Company convinced of the need to reorganise land revenue on a sound basis.
• Even before Cornwallis’s arrival, a number of Company officials and European observers — including Alexander Dow, Henri Patullo, Philip Francis, and Thomas Law — had, since 1770, been advocating for land tax to be permanently fixed.
  • Despite their varied ideological orientations, they shared a common faith in the Physiocratic school of thought, which assigned primacy to agriculture within a country’s economy.
  • Alexander Dow, in his History of Hindustan (1768–72), first introduced the idea of permanent settlement; this idea was later elaborated by the economist Henri Patullo in 1772.
  • The idea of recognising zamindars as proprietors of land on a permanent basis was put forward by Philip Francis in 1776.
  • Pitt’s India Act of 1784, influenced by Francis’s ideas, laid down the directions for permanent rules governing land revenue.

Move towards Permanent Settlement

• When Lord Cornwallis arrived in India as Governor-General in 1786, the land revenue system introduced by Warren Hastings had already created numerous problems, with English officials expressing widely differing opinions about its viability.
  • As a member of Britain’s landed aristocracy, imbued with the idea of improving landlordism, Cornwallis’s natural preference lay with the zamindars.
  • He recognised that the existing system was impoverishing the country, ruining agriculture, and failing to produce the large, regular surplus the Company had hoped for — the Company’s trade also suffered, given growing difficulty in procuring Indian goods for export to Europe, since the production of silk and cotton, two of its major export items, was agriculture-based, and agricultural decline further hurt handicraft production.
  • It was thus concluded that the only way to improve the situation was to fix the revenue permanently.
• There were, in fact, two main schools of thought regarding the land revenue settlement:
  • According to James Grant: zamindars possessed no permanent rights, whether as proprietors of the soil or as officials collecting and remitting rent — and the state was not bound by any definite limit on its demands from them.
  • According to Sir John Shore: proprietary rights in land belonged to the zamindars, and the state was entitled only to customary revenue from them. John Shore’s Minute (1789) created the framework of the eventual Zamindari settlement.
• The instructions of the Court of Directors ultimately made Cornwallis’s task considerably easier, sparing him extensive independent deliberation — the Directors instructed that, after assessing the revenue records of past years, a settlement should be made with the zamindars for a set number of years, with a view to making it permanent in the future.
• After prolonged discussion and debate, the Permanent Settlement was finally introduced in Bengal and Bihar in 1793 by Lord Cornwallis.
  • In fact, the Zamindari settlement, introduced in 1790 as a ten-year settlement based on Shore’s 1789 Minute, was made permanent in 1793 — thus emerging as the Permanent Settlement of 1793, which introduced in Bengal the policy of “assessment for ever.”
• Since the land revenue was to be fixed in perpetuity, it was also fixed at a high — indeed, near-maximum — level.
  • Taking the assessment for 1789–90 as the standard, revenue was fixed at Rs 2.68 crore (approximately £3 million).
  • According to P.J. Marshall, the 1793 revenue demand was only about 20 per cent higher than what had prevailed before 1757; but according to B.B. Chaudhuri’s calculation, it had “nearly doubled” between 1765 and 1793.
• The settlement was introduced in Bengal, Bihar, and Orissa, and later extended to Varanasi and parts of the northern districts of Madras; it was also introduced in the tribal area of Chota Nagpur, replacing the traditional Khuntkatti system.

Main Features of the Permanent Settlement

• Under the zamindari system, the zamindar — many of whom had previously been mere revenue collectors — was recognised as the owner/proprietor of the land, with the right to mortgage, bequeath, transfer, sell, and pass on the land by inheritance.
  • The British East India Company made the settlement directly with them: zamindars were to act not merely as government agents collecting revenue from the ryot, but as owners of the entire land within their zamindaris.
  • Their right of ownership was made hereditary and transferable, and zamindars could freely sell or purchase land.
  • The State held the zamindar responsible for payment of land revenue, and in default, the land could be confiscated and sold.
• Under this system, cultivators were reduced to the low status of mere tenants, deprived of their long-standing rights to the soil and other customary privileges — including the use of pastures, forests, irrigation lands, fisheries, and homestead plots, and protection against rent enhancement.
  • The tenantry of Bengal was, in effect, left entirely at the mercy of the zamindars, so that the latter might reliably pay the Company’s exorbitant revenue demand on time.
  • Zamindars, in turn, were expected to improve the condition of their tenants and of agriculture generally.
• Zamindars were required to pay a fixed amount of land revenue, which could never later be increased.
  • Under the system, zamindars were to remit 10/11ths of the rental they derived from the peasantry to the state, retaining only 1/11th (about 11 per cent) for themselves — leaving the state’s share at roughly 89 per cent, a very high demand indeed.
  • Should a zamindar’s rental income rise due to the extension of cultivation, agricultural improvement, or an enhanced capacity to extract from tenants, he would keep the entire increase; the state would make no further demand upon him.
• The “Sunset Law” of 1794 enacted the sale of zamindari rights by government auction in the event of failure to pay revenue.
  • The state kept no direct contact with the peasants, and did not interfere in the zamindars’ internal dealings with tenants, so long as the fixed land revenue was paid.
• The initial fixation of revenue was made arbitrarily, without any real consultation with the zamindars, as officials sought to secure the maximum possible amount — resulting in very high assessments.
  • John Shore, who planned the Permanent Settlement and later succeeded Cornwallis as Governor-General, calculated that if the gross produce of Bengal, Bihar, and Orissa were taken as 100, the government claimed 45, zamindars and other intermediaries received 15, and only 40 remained with the actual cultivator.
• The Regulations of 1799 and 1812 gave zamindars the right to seize tenant property for non-payment of rent, without requiring any court permission.
• A significant snag in the Permanent Settlement was that, while the state’s revenue demand was fixed, the rent to be charged by the landlord on the cultivator was left entirely unsettled and unspecified.
  • This resulted in widespread rack-renting and the frequent ejection of tenants from their traditional holdings.
  • The Bengal Rent Acts of 1859 and 1885 eventually provided some relief to cultivators.

Absentee Landlordism

• Absentee landlordism emerged as a consequential feature of Bengal’s Permanent Settlement.
  • While zamindars were meant to collect and remit revenue on time, many found the amount demanded by the British difficult to pay, and consequently began sub-feudalising their estates to unofficial middlemen.
  • One such zamindar, the Raja of Burdwan, divided most of his estate into fractions called patni taluqs, each permanently rented to a holder known as a patnidar, who promised a fixed rent — failure to pay meant the patni could be seized and sold. Other zamindars followed suit, setting off a broader process of subinfeudation.
  • A new class of unofficial middlemen thus emerged between zamindars and peasants: a zamindar would sublet land to such middlemen and relocate to cities like Calcutta to lead a life of luxury.
  • Zamindars thus turned into absentee landlords; old, rural-based zamindar families were gradually replaced by new urban landlords, who acquired zamindaris by any means necessary — for both profit and social distinction.
  • These urban zamindars left the task of revenue collection to servants and agents, worsening peasant exploitation, as such middlemen often extorted almost the entirety of a peasant’s produce.

Merits of the Settlement

• Scholarly and historical opinion on Cornwallis’s Permanent Settlement differs widely.
  • Marshman, for instance, called it “a bold step and a wise measure,” noting that under the general influence of this territorial charter — which for the first time created indefeasible interest in the population — cultivation expanded, and gradual improvements became visible in the people’s habits and comforts.

Financially

• The Permanent Settlement secured a fixed and stable income for the state, which could rely on this income regardless of the monsoon.
  • The Government was thus saved from the fluctuation of its income, assured a steady and ample revenue for both its commercial and administrative needs, and spared the expense of periodic reassessment and settlement.
  • There was also financial advantage in abolishing the entire revenue-collecting machinery of tehsildars, qanungos, patwaris, and other revenue officers.

Politically

• Under Mughal rule, zamindars had wielded considerable power, exercising magisterial and executive authority alongside their revenue duties; the Permanent Settlement stripped away these political powers, along with their capacity to create trouble.
  • Lord Cornwallis expected the settlement to create a class of loyal zamindars, prepared to defend British interests at all costs, since their rights were now guaranteed by the British — their position, in turn, depended entirely on the British Government.
  • Thus, the Permanent Settlement secured the British government the political support of an influential class, much as the Bank of England had for King William III after 1694.
  • Cornwallis’s expectations proved correct: during the Great Mutiny of 1857, these zamindars remained firmly loyal to the British, offering the rebels no help, direct or indirect.

Facilitated the Collection of Land Revenue

• The settlement simplified the method of revenue collection for the Company.
  • Before the Permanent Settlement, the East India Company had to maintain a large establishment for annual or five-yearly assessments and collections — a burden the new system removed.

Improved Judicial Services

• The Permanent Settlement is credited with freeing the Company’s ablest servants for judicial service, since they no longer had to spend much of their time on revenue work.

Increased Land Value

• Most zamindars devoted attention to improving their land, instructing tillers to work hard and improve the soil.
  • In many areas, wasteland and jungle were converted into cultivable land, thereby increasing land values.

Merits Visualised and Expected

• The Permanent Settlement was meant to encourage agricultural enterprise and prosperity.

Economically

• Since the state’s demand was fixed, landlords were expected to invest in improving the land, as the entire benefit of increased production and enhanced income would accrue to them.
  • It was claimed the settlement would encourage agricultural enterprise, reclaim wasteland, and improve the soil under cultivation.
  • Zamindars were expected to introduce new farming methods and techniques — better seeds, the use of manure and fertiliser, improved crop rotation, and better irrigation facilities.
  • Thus, the settlement was meant to create conditions for developing the fullest power of the soil, producing, in turn, a contented and resourceful peasantry.

Socially

• It was hoped that zamindars would act as the natural leaders of the peasantry, showing public spirit by helping spread education and support other charitable activities.

Increase of Trade, Industry, and Commerce

• The Permanent Settlement was expected to make zamindars very wealthy, allowing them to invest their surplus capital in trade, industry, and commerce.

Possibility of Increased Government Income

• Though the Government could not raise land revenue directly, it stood to benefit indirectly — the Company would receive its taxes regularly, and, as Cornwallis believed, could raise income when necessary by taxing trade and commerce as people grew richer.

Some Other Benefits

• The settlement was expected to avoid the evils typically associated with temporary settlement — the harassment of cultivators, the tendency of cultivators to abandon land, and so on.
  • It was hoped this would reduce the scope for corruption that existed when officials could alter assessments at will.
  • It was also considered easier to collect revenue from a small number of zamindars than from innumerable peasants, which would have required a much larger administrative machinery.

Demerits of the Settlement

• Many scholars have argued that the Permanent Settlement adversely affected the interests of the Company, the zamindars, and — worst of all — the peasants.
  • Holmes remarked: “The permanent settlement was a great blunder. The inferior tenants derived from it no benefit whatsoever.”

Impact on the Peasantry

• The system largely overlooked peasant interests, and peasants faced substantial losses under it.
  • The Permanent Settlement vested land ownership rights in the zamindars, who had previously held only revenue-collecting rights — those who lost out were the peasants, left entirely at the mercy of the zamindars.
    • Their customary occupancy rights were ignored, reducing them to the status of mere tenants — effectively kashtakars (landless labourers) working the land.
  • All traditional rights relating to land — over pastures, forests, and canals — were taken back, and peasants had no avenue of appeal against rising taxes.
    • The provision of a patta — a written agreement recording the rent to be paid — was rarely honoured by zamindars, leaving peasants entirely subject to the zamindar’s will.
  • Many zamindars extracted as much as possible from peasants to fund a lavish lifestyle.
    • In 1799, zamindars were granted the right to evict peasants unable to pay tax, and to seize their property; when peasants defaulted owing to natural calamity or other causes, their land was similarly taken over.
  • By recognising the zamindars’ absolute ownership rights, the Company sacrificed peasant interests in both property and occupancy — leading some scholars to argue that later tenancy legislation was enacted primarily to keep the countryside quiet.
  • Sir Edward Colebrooke observed that it was a grave mistake to sacrifice peasant interests, since it deprived land occupiers of their hereditary rights in the soil, leaving them at the mercy of landlords and subject to rack-renting and extortion.
  • As the Company’s income was now fixed, it levied many new taxes, further burdening peasants and ordinary people.
• Whatever limited economic or political purpose the settlement may have served in its early years, it soon turned into an engine of exploitation and oppression, creating “feudalism at the top and serfdom at the bottom.” Many of its claimed advantages proved illusory.
  • It was, in short, a blunder to strip the majority — the cultivators — of ownership rights. As Metcalfe wrote: “Cornwallis instead of being the creator of property in India was the great destroyer of it.”
  • Cultivators reduced to tenant status suffered greatly under their landlord-masters, since the government enacted no protective law until 1859.
    • The tenancy legislations of 1859 and 1885 offered some protection by recognising occupancy rights — coming at a time when Company rule had transformed into a confident territorial state seeking to penetrate deeper into the economy and society.
    • Yet zamindari power remained largely unrestrained, and its alliance with the Raj unaltered; these new legal reforms failed to relieve poor cultivators and instead only strengthened a class of powerful rich peasants — the jotedars — who effectively controlled landholding at the village level, even as zamindars retained only the revenue-collecting right.
• The Permanent Settlement retarded Bengal’s economic progress.
  • Most landlords showed little interest in improving the land, being concerned chiefly with extracting the maximum possible rent from the ryot.
  • Cultivators, living under constant fear of ejection, had no incentive to improve the land, while zamindars themselves lived away from their estates in cities, squandering time and money on luxury.
  • This process of subinfeudation sometimes reached absurd proportions, with as many as fifty intermediaries in a single chain — each looking only to their own profit, reducing the ryot to the position of a pauper.

Disadvantage to the Government

• In the long run, the state proved to be a great loser.
  • The advantage of a fixed, stable income came at the cost of any prospective share in rising land revenue — even as new land was brought under cultivation and rents on existing land rose manifold, the state could claim no share in this increase.
  • Since income remained fixed while expenses rose steadily, the government was forced to impose extra taxes on other provinces to cover Bengal’s growing deficit.

Politically

• The Permanent Settlement suited the interests of the Company well, making zamindars — along with other vested interests — the favourite children of imperialism.
  • The system, however, also divided rural society into two hostile classes — the zamindars and the tenants.
  • Almost immediately after the settlement, a struggle emerged between local governments and zamindars, who, instead of cooperating in administration, embarrassed the government at every opportunity; zamindari areas frequently suffered law-and-order problems, with zamindars often promoting or conniving in criminal activity.
  • The system also loosened the bond between government and people: so long as rents were paid regularly, the zamindar was left free to act as he pleased, with the collector remaining in the background — leaving the government with little knowledge of the interior or genuine contact with the masses.
    • This adversely affected the government’s capacity to control the country, weakening its authority overall — British administration gained the loyalty of the few at the cost of alienating the masses.

Disadvantageous to the Zamindars Too

• It was later widely admitted, by officials and non-officials alike, that before 1793, Bengal and Bihar’s zamindars had not actually enjoyed proprietary rights over most of the land — raising the question of why the British recognised them as such.
  • One explanation lies in a misunderstanding: in England, the central agricultural figure of the time was the landlord, and British officials mistakenly assumed the zamindar occupied an equivalent position in India.
  • Yet in one crucial respect, officials clearly differentiated between the two: the British landlord owned land not only in relation to his tenant, but also in relation to the state; in Bengal, however, while the zamindar was landlord over the tenant, he remained subordinate to the state — effectively reduced to the status of a tenant of the East India Company himself.
    • Unlike the British landlord, who paid only a small share of income as land tax, the Bengal zamindar had to remit 10/11ths of his land income as tax, and could be summarily evicted, his estate sold, if he failed to pay revenue on time.
• Though the settlement was broadly pro-zamindar, they too faced considerable difficulties, since absolute ownership ultimately rested with the imperial authority — resulting in the frequent sale of zamindari estates:
  • Between 1794 and 1807, land yielding about 41 per cent of Bengal and Bihar’s revenue was sold at auction.
  • In Orissa, between 1804 and 1818, 51.1 per cent of the original zamindars were wiped out through auction sales.
  • This meant the collapse of most old zamindari houses — though those who purchased these estates were rarely “new” men in Bengal’s agrarian society; the old zamindaris were typically parcelled out among their own amlas (zamindari officials), rich tenants, or neighbouring zamindars.
  • A few old houses, such as the Burdwan Raj, survived by resorting to the novel method of subinfeudation, complicating the tenurial structure to an almost absurd degree — these patni tenures sometimes proliferated up to twelve grades between zamindar and peasant, further increasing the burden on the latter.

No Improvement in Agriculture

• Lord Cornwallis had expected that, once assured of proprietorship, zamindars would invest in improving the land.
  • This expectation was largely belied: instead of spending increased profits on agricultural improvement and village welfare, most zamindars spent this income on their own luxuries and pleasures.