The change did not improve matters much, so that when the five years’ settlement expired the Company adopted the method of annual assessment by public auction, but special instructions were issued to the Provincial Councils to give preference to the zamindars in making these annual settlements of land revenue. In 1781 a new plan was adopted for the administration of revenue. The essence of the new plan was to centralize the whole business of revenue collection in Calcutta. A new Committee of Revenue was set up, consisting of four members assisted by a Diwan. The Provincial Councils were abolished, and although European Collectors were reappointed in each district, they had no real powers and were merely figureheads.
The scheme suffered from all the evils and abuses of over- centralization and soon broke down. In 1786 a rational scheme was adopted. Districts were now organized into regular fiscal units, and the Collector in each district was made responsible for settling the revenue and collecting it. At first the whole province was divided into thirty-five districts, but in 1787 the number was reduced to twenty-three. The Committee of Revenue was now, reconstituted as a Board of Revenue with a member of the Council as its President. The duties of the Board were clearly defined and consisted mainly in “controlling and advising the collectors and sanctioning their settlements. A new officer, Chief Sheristadar, was appointed to deal with the detailed records of land-tenure and land-revenue, so that the requisite knowledge might be available to the Government, instead of remaining a secret monopoly of the Qanungoes.
The system of annual settlement continued till the beginning of A.D. 1790. It was obviously a temporary expedient and recognised as such, but had to be continued as the requisite data had to be collected before embarking upon a system of a more permanent character. The problem was further complicated by the varying theories about the ownership of land. The policy of “assessment for ever”, which was the central point in the Permanent Settlement of Bengal, introduced in 1793, had been “vaguely anticipated” by some junior officers of the Company between 1765 and 1793, viz. by Alexander Dow in 1770, by Henry Pattullo two years later, and by Philip Francis in 1776. This idea was present in Pitt’s India Act of 1784; during the end of the decade Thomas Law accepted it for his mukarari settlements in Bihar, and it received legal sanction in Cornwallis’ rules for Decennial Settlement in 1789-90.
The different views on this subject were crystallized into the opposing theories of Grant and Shore, two senior servants of the Company, who had specially applied themselves to the thorny question of land-revenue. Shore maintained that the zamindars were the proprietors of the land and were only liable to pay a customary revenue to the Government. Grant, on the other hand, was of opinion that the proprietary right of the land was vested in the Government, and they had unrestricted rights to make settlements with anybody, zamindar or farmer, on any terms they liked. The authorities in England adopted Shore’s views, and accordingly instructed Cornwallis to make settlement with the zamindars, as far as practicable. The settlement was to be made at first for a period of ten years only, but with a definite idea of making it ultimately permanent.
In pursuance of the instructions received from England, Cornwallis appointed Shore President of the Board of Revenue, and some steps were taken with a view to making a long-term settlement. The necessary preliminaries were not completed till 1790, but during this interval Cornwallis views underwent an important change. Instead of a provisional settlement for ten years to be ultimately made permanent, he decided upon launching immediately a plan of permanent settlement. His views were opposed by most of his advisers, including both Shore and Grant. Grant naturally wanted to postpone an irrevocable measure of this type till a further and exhaustive study of the records was made to decide the question of the proprietary right of the land. Shore wanted to postpone it till a proper survey could enable the Government to make the perpetual assessment on a sound and equitable basis.
Cornwallis, on the other hand, maintained that enough material was already in the possession of the Government to decide the issue, both as regards the theoretical aspect of the question, as well as the more practical one, viz. fixing the total amount of the revenue to be demanded from zamindars. He further held that at present revenue matters were taking so much of the time and energy of the Government that nothing but a permanent measure of this type would enable them to devote the proper share of attention to the more important duties of the Government like administration and justice. Among the beneficent effects of a permanent settlement of land Cornwallis laid particular stress upon the encouragement it would give the zamindars not only to develop their lands but also to reclaim waste lands which extended at that time over a large portion of the whole province.
On the 10th February, 1790, Cornwallis announced the settlement of land-revenue for ten years, to be made permanent if approved by the Court of Directors. The approval of the Directors reached Cornwallis in 1793, and on 22nd March of that year the Decennial Settlement was declared permanent. Its effect was to make the zamindars permanent owners of the land, subject to the payment of a fixed annual revenue to the Government.
A thorny problem was thus solved after various experiments had been tried for more than twenty-five years. As to the justice and equity of this solution and its ultimate effect upon the country, opinions have always differed, as they differ even to-day. There is no doubt that it ultimately, but not without many years of suffering, created a class of loyal land-holders who formed a stable element in the State, and a ready source of a fixed amount of revenue. But it deprived the Government of the benefit of a gradually expanding income from the land, which forms the most valuable source of revenue in Bengal. Further, while it fully conceded the claims of the zamindars, it altogether ignored those of the cultivators, who were placed absolutely at the tender mercies of the zamindars. Cornwallis certainly issued regulations to limit and control the authority of the zamindar over his tenants, but these bore little fruit, and further legislation became necessary to remedy this grave defect of the Permanent Settlement. A few words may be said regarding the other sources of revenue referred to above.
The revenues of salt and opium were at first managed by the system of auction, as in the case of land-revenue, the settlement being made with the highest bidder. In 1780 the manufacture of salt was directly taken up by the Government and a small establishment was set up to manage it under the control of the Supreme Council. The Sair revenue was managed by the same agency as the land-revenue.