Permanent Settlement - Overview

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".