Government gave out the collection of land revenue on a contract basis to a contractor who offered to pay the largest amount from a district or sub-division for a certain number of years.It was introduced in 1772.
Issues with farming system
- Extortion of farmers: Contractors tried to extort maximum possible amount from farmers. This resulted in oppression, extortion and impoverishment of farmers.
- Failure to make payments: Many contractors had offered to pay very high amounts which they could not collect even after oppression.
- Corruption: There was nepotism in the granting of contracts, leading to loss to the government.
- This prompted Cornwallis to undertake comprehensive reforms of the revenue administration and led to the introduction of Permanent Settlement.