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The Permanent Settlement - also known as the Permanent Settlement of Bengal (Bangla: চিরস্থায়ী বন্দোবস্ত, Chirosthayi Bandobasto) - was an agreement between the East India Company and Bengali landlords with far-reaching consequences for both agricultural methods and productivity in the entire Empire and the political realities of the Indian and Pakistani countryside. It was concluded in 1793, by the Company administration headed by Lord Cornwallis.

Contents 1 Background 2 Nature of the Permanent Settlement 3 Influence of the Permanent Settlement 4 Further reading

Earlier zamindars in Bengal, Bihar & Orissa had been functionaries who merely held the right to collect revenue on behalf of the Mughal emperor and his representative or diwan in Bengal, who in turn would supervise their activity closely and ensure that they were neither lax nor overly stringent. However, the East India Company, on being awarded the diwani or overlordship of Bengal by the empire following the battle of Plassey in 1757, found itself short of trained administrators, especially those familiar with local custom and law. As a result, landholders found themselves unsupervised reporting to corrupt and indolent officials; consequently the extraction of revenue proceeded unchecked by any regard for future income or local welfare.

Following the devastating famine of 1770, which was partially caused by this short-sightedness, the importance of oversight of revenue officials was understood by the Company officials in Calcutta. Unfortunately, the question of incentivisation was ignored; hence Warren Hastings, then governor-general, introduced a system of five-yearly inspections and temporary tax farmers.

Naturally, those appointed as tax farmers absconded with as much as they could in the time period in between inspections. The disastrous consequences of the system were noted in Parliament, and in 1784 British Prime Minister Pitt the Younger directed the Calcutta administration to alter it forthwith; in 1786 Cornwallis was sent out to India to oversee the alteration.

In 1786 the East India Company Court of Directors first proposed a permanent settlement for Bengal, they were acting against the policy being pursued at that time by Calcutta which was attempting to increase taxation of zamindars. Between 1786 and 1790 the new Governor-General Lord Cornwallis and Sir John Shore (later Governor-General himself) entered a heated debate over whether or not to introduce a permanent settlement with the zamindars. Shore argued that the native zamindars would not trust the permanent settlement to be permanent and that it would take time before they realised it was genuine, Cornwallis believed that they would immediately accept it and begin investing in improving their land. In 1790 the Court of Directors issued a ten year (Decennial) settlement to the zamindars which was later made permanent in 1793.

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 conferred proprietorial rights 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 indicated that improvements of the land such as drainage, irrigation and the construction of roads and bridges were encouraged; such infrastructure was insufficient through much of Bengal. With a fixed land tax, zamindars wcould securely invest in increasing their income without any fear of having the increase taxed away by the Company. Cornwallis made this motivation quite clear, writing '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 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 Company hoped that the zamindar class would not only be a revenue-generating instrument but serve as intermediaries for the more political aspects of their rule, preserving local custom and protecting rural life from the possibly rapacious influences of its own representatives. However, this worked both ways; zamindars became a naturally conservative interest group and once British policy changed to one of reform and intervention in custom in the mid-nineteenth, they were vocal in their opposition.

While the worst of the tax-farming excesses were countered by the introduction of the Settlement, the use of land was not part of the subject of the agreement; hence the tendency of Company officials and Indian landlords to force their tenants into plantation-style farming of cash crops like indigo and cotton rather than rice and wheat. This was a cause of many of the worst famines of the nineteenth century. In addition, zamindars eventually became absentee landlords, with all that that implies for neglect of investment on the land.

Once the salient features of the Settlement were reproduced all over India - and indeed elsewhere in the Empire, including Kenya - the political structure was altered forever, with the landlord class holding much greater power than they had under the Mughals, where they were subject to oversight by a trained bureaucracy with the power to attenuate their tenure. In India, not until the first efforts towards land reform in the 1950s - still incomplete everywhere except, ironically, West Bengal - was the power of the landlord caste/class over smallholders diluted. In Pakistan, where land reform was never carried out, elections in rural areas still suffer from a tendency towards oligarchy reflecting the concentration of influence in the hands of zamindar families.

• The History of India, vol 2, T.G.Percival Spear. Penguin, ISBN 0-14-013836-6
• India, John Keay, Grove Publishers, ISBN 0-8021-3797-0
• An Essay on the Permanent Settlement, Ranajit Guha, Duke U Press, ISBN 0-8223-1771-0