The Permanent Settlement System, also known as the Permanent Settlement System of Bengal, was an agreement between the East India Company and landlords.
A creation of British rule and many non-economic considerations entered its acceptance.
Provisions
- Introduced in 1793 by Lord Cornwallis and covered around one-fifth of British territory in India, including Bengal, Bihar, Orissa, parts of Northern Karnataka, Varanasi and some other areas.
- With the permanent settlement, auctioning of land (Izaradar system in Bengal) ended. Company recognized Zamindars as owners of soil. They were given permanent hereditary to collect revenue. Zamindars were to pay a fixed amount of land revenue on a fixed date every year. This amount could not be increased later; however, if Zamindar failed to pay the amount on a fixed date, Company could sell their land via public auction.
- Zamindars were allowed to keep force and maintain order in their districts. They were expected to improve the conditions of tenants, but the company would not interfere in their internal dealings with the tenants so long they paid the fixed land revenue.
Motivations
- Reduce scope for corruption that existed when officials could alter assessment at will.
- Investment in agriculture: Since state would not demand any incremental tax if production increased, it was hoped that landowners would invest money in improving the land boost agriculture.
- Boost to handicrafts: Agriculture was essential for Companies exports to Europe as production of silk, cotton etc. depended on irrigation. Thus, healthy agricultural sector would boost trade and government can gain by taxing trade and commerce
Assessment of the Permanent Settlement System
- The rate was very high for example in Bengal it was 89% which led to creating a huge amount of tax collections for the British government which clear from the fact that by the year 1790-91, the collection was Rs 268 lakhs which was nearly double the collections of 1765-66
- A snag in this system was that while the state’s land revenue demand was fixed, the rent to be realised by the zamindar from the cultivator was left unsettled and unspecified. This resulted in rack renting and frequent ejection of tenants from their traditional land holdings.