3.1.1. Revenue for the Company

The Company had become the Diwan, but it still saw itself primarily as a trader. It wanted a large revenue income but was unwilling to set up any regular system of assessment and collection. The effort was to increase the revenue as much as it could and buy fine cotton and silk cloth as cheaply as possible.

The East India Company, now in charge of Bengal as the Diwan, continued to identify primarily as a trading entity rather than an administrative government. It sought to generate as much revenue as possible but avoided establishing a consistent system for assessing land and levying taxes. This meant that their focus was on maximizing profits through trade, particularly in valuable textiles like cotton and silk. As a result, they aimed to purchase these goods at the lowest prices possible, increasing their profit margins.

Imagine a modern company that sells clothes. If the company wants to maximize profit, it might look to buy clothing materials at the cheapest rates and sell the finished products for a higher price. However, it may miss creating a structured approach to monitor its suppliers and keep track of where materials come from, which could lead to supply inconsistencies later.

Soon it was clear that the Bengal economy was facing a deep crisis. Artisans were deserting villages since they were being forced to sell their goods to the Company at low prices. Peasants were unable to pay the dues that were being demanded from them. Artisanal production was in decline, and agricultural cultivation showed signs of collapse. Then in 1770, a terrible famine killed ten million people in Bengal. About one-third of the population was wiped out.

The Company's aggressive revenue collection and purchasing practices led to severe economic distress among local artisans and farmers. With the Company demanding low prices for goods and high taxes from peasants, many struggled to survive. This economic pressure contributed to widespread abandonment of villages as people fled in search of better opportunities. Tragically, this culminated in a devastating famine in 1770, which resulted in the loss of approximately ten million lives, reflecting the dire consequences of the Company’s exploitative policies.

Think of a community bakery forced to sell bread to a corporate chain at very low prices, leaving little for the bakers to sustain themselves. As profits dwindle, bakers might leave the town, leading to a decrease in local bread consumption and eventually a shortage of food in the area. Without careful regulation and fair business practices, the entire community suffers economically.

If the economy was in ruins, could the Company be certain of its revenue income? Most Company officials began to feel that investment in land had to be encouraged and agriculture had to be improved. How was this to be done? After two decades of debate on the question, the Company finally introduced the Permanent Settlement in 1793.

Recognizing the dire economic situation, Company officials came to the conclusion that improvements in agricultural productivity were essential for securing stable revenue. To facilitate this, they debated for 20 years and eventually instituted the Permanent Settlement in 1793. This settlement aimed to create stability by allowing local landowners (zamindars) to collect taxes from peasants, under the promise that their own tax obligations would not increase. This was anticipated to incentivize landowners to invest in land improvements.

Consider a city council that decides to invest in local farmers' tools and irrigation systems to improve crop yields. By ensuring that these farmers can keep their profits while maintaining steady taxes, the council encourages their growth and ensures a more consistent food supply for the community.

The Permanent Settlement, however, created problems. Company officials soon discovered that the zamindars were in fact not investing in the improvement of land. The revenue that had been fixed was so high that the zamindars found it difficult to pay. Anyone who failed to pay the revenue lost his zamindari.

While the Permanent Settlement aimed to secure revenue by fixing tax amounts, it led to unintended consequences. Instead of investing in land, many zamindars borrowed heavily or sold off land to meet their revenue obligations, resulting in widespread dispossession. This system failed to consider the economic realities facing the zamindars and ultimately hurt agricultural productivity, as they were unable to afford improvements or maintenance of the land.

Imagine a small business owner who is given a fixed rent for their shop space but is struggling to make ends meet. To keep up with rent, they might neglect repairs and improvements to the shop. Over time, the shop declines in value, resulting in lower customer turnout, further endangering their ability to pay rent and keep the business afloat.

By the early nineteenth century, many of the Company officials were convinced that the system of revenue had to be changed again. How could revenues be fixed permanently at a time when the Company needed more money to meet its expenses of administration and trade? ... Under his directions, collectors went from village to village, inspecting the land, measuring the fields, and recording the customs and rights of different groups.

As frustrations grew with the Permanent Settlement, officials recognized a shift was needed to ensure better revenue collection that aligned with the economic realities of the time. The ryotwari system was developed wherein taxes would be assessed and collected directly from individual peasants, rather than through zamindars. This approach allowed for better oversight and adaptability to changing economic conditions. The goal was to establish a more direct relationship between the cultivators and the Company, facilitating fair taxation and improving revenue reliability.

Think of a cooperative where members directly contribute towards a communal fund, based on their income variations rather than a fixed amount. This model allows for financial stability as contributions align better with members’ abilities to pay, ensuring everyone can contribute as per their circumstances.

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