Permanent Settlement
Encyclopedia
The Permanent Settlement — also known as the Permanent Settlement of Bengal
(Bangla: চিরস্থায়ী বন্দোবস্ত, Chirosthayi Bandobasto) — was an agreement
between the East India Company
and Bengal
i landlords to fix revenues to be raised from land, with far-reaching consequences for both agricultural methods and productivity in the entire Empire
and the political realities of the India
n countryside. It was concluded in 1793, by the Company administration
headed by Charles, Earl Cornwallis
. It formed one part of a larger body of legislation enacted known as the Cornwallis Code
.
, Bihar
and Orissa
had been functionaries who held the right to collect revenue on behalf of the Mughal
emperor and his representative or diwan in Bengal. The diwan supervised the zamindars to ensure that they were neither lax nor overly stringent. When the East India Company was awarded the diwani or overlordship of Bengal by the empire following the Battle of Buxar
in 1764, it found itself short of trained administrators, especially those familiar with local custom and law. As a result, landholders were unsupervised or they reported to corrupt and indolent officials. The result was that revenues were extracted without regard for future income or local welfare.
Following the devastating famine of 1770, which was partially caused by this short-sightedness, Company officials in Calcutta better understood the importance of oversight of revenue officials. They failed to consider the question of incentivisation
; hence Warren Hastings
, then governor-general
, introduced a system of five-yearly inspections and temporary tax farmers
.
Many of those appointed as tax farmers absconded with as much revenue as they could during the time period between inspections. Parliament
took note of the disastrous consequences of the system, and in 1784 British Prime Minister William Pitt the Younger
directed the Calcutta administration to alter it immediately. In 1786 Charles Cornwallis
was sent out to India
to reform the company's practices.
In 1786 the East India Company Court of Directors first proposed a permanent settlement for Bengal, changing the policy then being followed by Calcutta, which was attempting to increase taxation of zamindars. Between 1786 and 1790, the new Governor-General Lord Cornwallis and Sir John Shore
(later Governor-General) entered a heated debate over whether or not to introduce a permanent settlement with the zamindars. Shore argued that the native zamindars would not trust the permanent settlement to be permanent, and that it would take time before they realised it was genuine. Cornwallis believed that they would immediately accept it and begin investing in improving their land. In 1790 the Court of Directors issued a ten-year (Decennial) settlement to the zamindars, which was made permanent in 1800.
By Permanent settlement Act 1793,Zamindars class became more powerful than they were in Mughal period.
Incentivisation of zamindars in this case was intended to encourage improvements of the land, such as drainage, irrigation and the construction of roads and bridges; such infrastructure had been insufficient through much of Bengal. With a fixed land tax, zamindars could securely invest in increasing their income without any fear of having the increase taxed away by the Company. Cornwallis made this motivation quite clear, declaring that "when the demand of government is fixed, an opportunity is afforded to the landholder of increasing his profits, by the improvement of his lands". The British had in mind "improving landlords" in their own country, such as Coke of Norfolk. The Court of Directors also hoped to guarantee the company's income, which was constantly plagued by defaulting zamindars who fell into arrears, making it impossible for them to budget their spending accurately.
The immediate consequence of the Permanent Settlement was both very sudden and dramatic, and one which nobody had apparently foreseen. By ensuring that zamindars' lands were held in perpetuity and with a fixed tax burden, they became desirable commodities. In addition, the government tax demand was inflexible and the British East India Company's collectors refused to make allowances for times of drought, flood or other natural disaster. The tax demand was higher than that in England at the time. As a result, many zamindars immediately fell into arrears.
The Company's policy of auction of any zamindari lands deemed to be in arrears created a market for land which previously did not exist. Many of the new purchasers of this land were Indian officials within the East India Company's government. These bureaucrats were ideally placed to purchase lands which they knew to be underassessed, and therefore profitable. In addition, their position as officials gave them opportunity to quickly acquire the wealth necessary to purchase land through bribery and corruption. They could also manipulate the system to bring to sale land that they specifically wanted. Historian Bernard.S.Cohn and others have argued that the Permanent Settlement led firstly to a commercialisation of land which previously did not exist in Bengal. And secondly, as a consequence of this, 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".
While the worst of the tax-farming excesses were countered by the introduction of the Settlement, the use of land was not part of the agreement. There was a tendency of Company officials and Indian landlords to force their tenants into plantation-style farming of cash crops like indigo and cotton rather than rice and wheat. This was a cause of many of the worst famines of the nineteenth century. In addition, zamindars eventually became absentee landlords, with all that that implies for neglect of investment on the land.
Once the salient features of the Settlement were reproduced all over India - and indeed elsewhere in the Empire, including Kenya - the political structure was altered forever. The landlord class held much greater power than they had under the Mughals
, where they were subject to oversight by a trained bureaucracy with the power to attenuate their tenure. In India, not until the first efforts towards land reform
in the 1950s, still incomplete everywhere except West Bengal
, was the power of the landlord caste/class over smallholders diluted. In Pakistan, where land reform was never carried out, elections in rural areas still suffer from a tendency towards oligarchy reflecting the concentration of influence in the hands of zamindar
families.
Bengal
Bengal is a historical and geographical region in the northeast region of the Indian Subcontinent at the apex of the Bay of Bengal. Today, it is mainly divided between the sovereign land of People's Republic of Bangladesh and the Indian state of West Bengal, although some regions of the previous...
(Bangla: চিরস্থায়ী বন্দোবস্ত, Chirosthayi Bandobasto) — was an agreement
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
between the East India Company
British East India Company
The East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China...
and Bengal
Bengal
Bengal is a historical and geographical region in the northeast region of the Indian Subcontinent at the apex of the Bay of Bengal. Today, it is mainly divided between the sovereign land of People's Republic of Bangladesh and the Indian state of West Bengal, although some regions of the previous...
i landlords to fix revenues to be raised from land, with far-reaching consequences for both agricultural methods and productivity in the entire Empire
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
and the political realities of the India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
n countryside. It was concluded in 1793, by the Company administration
Cornwallis in India
British General Charles Cornwallis, the 2nd Earl Cornwallis, was appointed in February 1786 to serve as both Commander-in-Chief of British India and Governor of the Presidency of Fort William, also known as the Bengal Presidency. Based in Calcutta, he oversaw the consolidation of British control...
headed by Charles, Earl Cornwallis
Charles Cornwallis, 1st Marquess Cornwallis
Charles Cornwallis, 1st Marquess Cornwallis KG , styled Viscount Brome between 1753 and 1762 and known as The Earl Cornwallis between 1762 and 1792, was a British Army officer and colonial administrator...
. It formed one part of a larger body of legislation enacted known as the Cornwallis Code
Cornwallis Code
The Cornwallis Code is a body of legislation enacted in 1793 by the East India Company to improve the governance of its territories in India. The Code was developed under the guidance of Charles, Earl Cornwallis, who served as Governor-General of India from 1786 to 1793.The code contained...
.
Background
Earlier zamindar]]s in BengalBengal
Bengal is a historical and geographical region in the northeast region of the Indian Subcontinent at the apex of the Bay of Bengal. Today, it is mainly divided between the sovereign land of People's Republic of Bangladesh and the Indian state of West Bengal, although some regions of the previous...
, Bihar
Bihar
Bihar is a state in eastern India. It is the 12th largest state in terms of geographical size at and 3rd largest by population. Almost 58% of Biharis are below the age of 25, which is the highest proportion in India....
and Orissa
Orissa
Orissa , officially Odisha since Nov 2011, is a state of India, located on the east coast of India, by the Bay of Bengal. It is the modern name of the ancient nation of Kalinga, which was invaded by the Maurya Emperor Ashoka in 261 BC. The modern state of Orissa was established on 1 April...
had been functionaries who held the right to collect revenue on behalf of the Mughal
Mughal Empire
The Mughal Empire , or Mogul Empire in traditional English usage, was an imperial power from the Indian Subcontinent. The Mughal emperors were descendants of the Timurids...
emperor and his representative or diwan in Bengal. The diwan supervised the zamindars to ensure that they were neither lax nor overly stringent. When the East India Company was awarded the diwani or overlordship of Bengal by the empire following the Battle of Buxar
Battle of Buxar
The Battle of Buxar was fought on 22 October 1764 between the forces under the command of the British East India Company, and the combined armies of Mir Qasim, the Nawab of Bengal; Shuja-ud-Daula Nawab of Awadh; and Shah Alam II, the Mughal Emperor...
in 1764, it found itself short of trained administrators, especially those familiar with local custom and law. As a result, landholders were unsupervised or they reported to corrupt and indolent officials. The result was that revenues were extracted without regard for future income or local welfare.
Following the devastating famine of 1770, which was partially caused by this short-sightedness, Company officials in Calcutta better understood the importance of oversight of revenue officials. They failed to consider the question of incentivisation
Incentivisation
Incentivisation or incentivization is the practise of building incentives into an arrangement or system in order to motivate the actors within it....
; hence Warren Hastings
Warren Hastings
Warren Hastings PC was the first Governor-General of India, from 1773 to 1785. He was famously accused of corruption in an impeachment in 1787, but was acquitted in 1795. He was made a Privy Councillor in 1814.-Early life:...
, then governor-general
Governor-General
A Governor-General, is a vice-regal person of a monarch in an independent realm or a major colonial circonscription. Depending on the political arrangement of the territory, a Governor General can be a governor of high rank, or a principal governor ranking above "ordinary" governors.- Current uses...
, introduced a system of five-yearly inspections and temporary tax farmers
Tax farming
Farming is a technique of financial management, namely the process of commuting , by its assignment by legal contract to a third party, a future uncertain revenue stream into fixed and certain periodic rents, in consideration for which commutation a discount in value received is suffered...
.
Many of those appointed as tax farmers absconded with as much revenue as they could during the time period between inspections. Parliament
Parliament of Great Britain
The Parliament of Great Britain was formed in 1707 following the ratification of the Acts of Union by both the Parliament of England and Parliament of Scotland...
took note of the disastrous consequences of the system, and in 1784 British Prime Minister William Pitt the Younger
William Pitt the Younger
William Pitt the Younger was a British politician of the late 18th and early 19th centuries. He became the youngest Prime Minister in 1783 at the age of 24 . He left office in 1801, but was Prime Minister again from 1804 until his death in 1806...
directed the Calcutta administration to alter it immediately. In 1786 Charles Cornwallis
Charles Cornwallis, 1st Marquess Cornwallis
Charles Cornwallis, 1st Marquess Cornwallis KG , styled Viscount Brome between 1753 and 1762 and known as The Earl Cornwallis between 1762 and 1792, was a British Army officer and colonial administrator...
was sent out to India
Cornwallis in India
British General Charles Cornwallis, the 2nd Earl Cornwallis, was appointed in February 1786 to serve as both Commander-in-Chief of British India and Governor of the Presidency of Fort William, also known as the Bengal Presidency. Based in Calcutta, he oversaw the consolidation of British control...
to reform the company's practices.
In 1786 the East India Company Court of Directors first proposed a permanent settlement for Bengal, changing the policy then being followed by Calcutta, which was attempting to increase taxation of zamindars. Between 1786 and 1790, the new Governor-General Lord Cornwallis and Sir John Shore
John Shore, 1st Baron Teignmouth
John Shore, 1st Baron Teignmouth was a British politician who served as Governor-General of India from 1793 to 1797.He married Charlotte Cornish, daughter of James Cornish of Teignmouth, on 14 February 1786...
(later Governor-General) entered a heated debate over whether or not to introduce a permanent settlement with the zamindars. Shore argued that the native zamindars would not trust the permanent settlement to be permanent, and that it would take time before they realised it was genuine. Cornwallis believed that they would immediately accept it and begin investing in improving their land. In 1790 the Court of Directors issued a ten-year (Decennial) settlement to the zamindars, which was made permanent in 1800.
By Permanent settlement Act 1793,Zamindars class became more powerful than they were in Mughal period.
Overview
The question of incentivisation now being understood to be central, the security of tenure of landlords was guaranteed; in short, the former landholders and revenue intermediaries were granted proprietarial rights (effective ownership) to the land they held. In addition, the land tax was fixed in perpetuity, so as to minimise the tendency by British administrators to amass a small fortune in sluiced-away revenue. Smallholders were no longer permitted to sell their land, though they could not be expropriated by their new landlords.Incentivisation of zamindars in this case was intended to encourage improvements of the land, such as drainage, irrigation and the construction of roads and bridges; such infrastructure had been insufficient through much of Bengal. With a fixed land tax, zamindars could securely invest in increasing their income without any fear of having the increase taxed away by the Company. Cornwallis made this motivation quite clear, declaring that "when the demand of government is fixed, an opportunity is afforded to the landholder of increasing his profits, by the improvement of his lands". The British had in mind "improving landlords" in their own country, such as Coke of Norfolk. The Court of Directors also hoped to guarantee the company's income, which was constantly plagued by defaulting zamindars who fell into arrears, making it impossible for them to budget their spending accurately.
The immediate consequence of the Permanent Settlement was both very sudden and dramatic, and one which nobody had apparently foreseen. By ensuring that zamindars' lands were held in perpetuity and with a fixed tax burden, they became desirable commodities. In addition, the government tax demand was inflexible and the British East India Company's collectors refused to make allowances for times of drought, flood or other natural disaster. The tax demand was higher than that in England at the time. As a result, many zamindars immediately fell into arrears.
The Company's policy of auction of any zamindari lands deemed to be in arrears created a market for land which previously did not exist. Many of the new purchasers of this land were Indian officials within the East India Company's government. These bureaucrats were ideally placed to purchase lands which they knew to be underassessed, and therefore profitable. In addition, their position as officials gave them opportunity to quickly acquire the wealth necessary to purchase land through bribery and corruption. They could also manipulate the system to bring to sale land that they specifically wanted. Historian Bernard.S.Cohn and others have argued that the Permanent Settlement led firstly to a commercialisation of land which previously did not exist in Bengal. And secondly, as a consequence of this, 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".
Influence
The Company hoped that the zamindar class would not only be a revenue-generating instrument but serve as intermediaries for the more political aspects of their rule, preserving local custom and protecting rural life from the possibly rapacious influences of its own representatives. However, this worked both ways; zamindars became a naturally conservative interest group. Once British policy in the mid-nineteenth century changed to one of reform and intervention in custom, the zamindars were vocal in their opposition.While the worst of the tax-farming excesses were countered by the introduction of the Settlement, the use of land was not part of the agreement. There was a tendency of Company officials and Indian landlords to force their tenants into plantation-style farming of cash crops like indigo and cotton rather than rice and wheat. This was a cause of many of the worst famines of the nineteenth century. In addition, zamindars eventually became absentee landlords, with all that that implies for neglect of investment on the land.
Once the salient features of the Settlement were reproduced all over India - and indeed elsewhere in the Empire, including Kenya - the political structure was altered forever. The landlord class held much greater power than they had under the Mughals
Mughal Empire
The Mughal Empire , or Mogul Empire in traditional English usage, was an imperial power from the Indian Subcontinent. The Mughal emperors were descendants of the Timurids...
, where they were subject to oversight by a trained bureaucracy with the power to attenuate their tenure. In India, not until the first efforts towards land reform
Land reform
[Image:Jakarta farmers protest23.jpg|300px|thumb|right|Farmers protesting for Land Reform in Indonesia]Land reform involves the changing of laws, regulations or customs regarding land ownership. Land reform may consist of a government-initiated or government-backed property redistribution,...
in the 1950s, still incomplete everywhere except West Bengal
West Bengal
West Bengal is a state in the eastern region of India and is the nation's fourth-most populous. It is also the seventh-most populous sub-national entity in the world, with over 91 million inhabitants. A major agricultural producer, West Bengal is the sixth-largest contributor to India's GDP...
, was the power of the landlord caste/class over smallholders diluted. In Pakistan, where land reform was never carried out, elections in rural areas still suffer from a tendency towards oligarchy reflecting the concentration of influence in the hands of zamindar
Zamindar
A Zamindar or zemindar , was an aristocrat, typically hereditary, who held enormous tracts of land and ruled over and taxed the bhikaaris who lived on batavaslam. Over time, they took princely and royal titles such as Maharaja , Raja , Nawab , and Mirza , Chowdhury , among others...
families.
Further reading
- The History of India, vol 2, T.G.Percival Spear, Penguin (1990) ISBN 0-14-013836-6
- India: A History, John Keay, Grove/Atlantic (2001) ISBN 0-8021-3797-0
- A rule of property for Bengal: an essay on the idea of permanent settlement, Ranajit Guha, Durham, Duke U Press (1996) ISBN 0-8223-1771-0