In 1773, the British Company decided to manage the land revenues directly.
Warren Hastings auctioned the right to collect revenue to the highest bidders. But his experiment did not succeed.
The amount of land revenue was pushed high by zamindars and other Speculators bidding against each other; however, the actual collection varied from year to year and seldom came up to official expectations. This introduced instability in the Company's revenues at a time when the Company was hard pressed for money.
Neither the ryot nor the zamindar would do anything to improve cultivation when they did not know what the next year's assessment would be or who would be the next year's revenue collector.
The idea of fixing the land revenue at a permanent amount was introduced. Finally, after prolonged discussion and debate, the Permanent Settlement was introduced in Bengal and Bihar in 1793 by Lord Cornwallis.
Permanent Settlement had some special features i.e.
The reminders and revenue collectors were converted into so many landlords. They were not only to act as agents of the Government in collecting land revenue from the ryot, but also to become the owners of the entire land (over which they were collecting revenue). Their right of ownership was made hereditary and transferable.
On the other hand, the cultivators were reduced to the low status of mere tenants and were deprived of long-standing rights to the soil and other customary rights.
The use of the pasture and forest lands, irrigation canals, fisheries, and homestead plots and protection against enhancement of rent were some of the cultivators’ rights which were sacrificed.
In fact the tenancy of Bengal was left entirely at the mercy of the zamindars. This was done so that the zamindars might be able to pay in time the exorbitant land revenue demand of the Company.
The zamindars were to give 10/11th of the rental they derived from the peasantry to the state, keeping only 1/11th for themselves. But the sums to be paid by them as land revenue were fixed in perpetuity.
At the same time, the zamindar had to pay his revenue rigidly on the due date even if the crop had failed for some reason; otherwise his lands were to be sold.
John Shore, the man who planned the Permanent Settlement and later succeeded Cornwallis as Governor-General, calculated that if the gross produce of Bengal be taken as 100, the Government claimed 45, zamindars and other intermediaries below them received 15, and only 40 remained with the actual cultivator.
Benefits of Permanent Settlement
Before 1793, the Company was troubled by fluctuations in its chief source of income, i.e. the land revenue. The Permanent Settlement guaranteed the stability of income.
The Permanent Settlement enabled the Company to maximize its income as land revenue was now fixed higher than it had ever been in the past.
Collection of revenue through a small number of zamindars seemed to be much simpler and cheaper than the process of dealing with lakhs of cultivators.
The Permanent Settlement was expected to increase agricultural production.
Since the land revenue would not be increased in future even if the zamindar's income went up, the latter would be inspired to extend cultivation and improve agricultural productivity.
The establishment of British rule in South and South-Western India brought new problems of land settlement. The officials believed that in these regions there were no zamindars with large estates with whom settlement of land revenue could be made and that the introduction of zamindari system would upset the existing state of affairs.
Many Madras officials led by Reed and Munro recommended that settlement should therefore be made directly with the actual cultivators.
The system they proposed, is known as the Ryotwari Settlement, under which the cultivator was to be recognized as the owner of his plot of land subject to the payment of land revenue.
The supporters of the Ryotwari Settlement claimed that it was a continuation of the state of affairs that had existed in the past.
Munro said: "It is the system which has always prevailed in India".
The Ryotwari Settlement was introduced in parts of the Madras and Bombay Presidencies in the beginning of the 19th century.
The settlement under the Ryotwari system was not made permanent. It was revised periodically after 20 to 30 years when the revenue demand was usually raised.
A modified version of the zamindari settlement, introduced in the Gangetic valley, the North-West Provinces, parts of Central India, and Punjab, was known as the Mahalwari System.
The revenue settlement was to be made village by village or estate (mahal) by estate with landlords or heads of families who collectively claimed to be the landlords of the village or the estate.
In Punjab, a modified Mahalwari System known as the village system was introduced. In Mahalwari areas also, the land revenue was periodically revised.
Both the Zamindari and the Ryotwari systems, departed fundamentally from the traditional land systems of the country.
The British created a new form of private property in land in such a way that the benefit of the innovation did not go to the cultivators.
All over the country, the land was now made salable, mortgagable, and alienable. This was done primarily to protect the Government's revenue.
If land had not been made transferable or salable, the Government would find it very difficult to realize revenue from a cultivator who had no savings or possessions out of which to pay it.
The British by making land a commodity which could be freely bought and sold introduced a fundamental change in the existing land systems of the country. The stability and the continuity of the Indian villages were shaken, in fact, the entire structure of the rural society began to break up.
