In 1765, the East India company got the Diwani of Bengal, Bihar and Orrisa.
Diwani gave the company all the financial administration which the company used tobenefit its trade.
The company wanted large revenue but without setting up any regulating system of collection.
The focus on trade resulted in the doubling of the value of the goods bought by the Company within five years in Bengal.
The purchase of goods was now being done with the revenue collected in Bengal, which resulted in a deep financial crunch in Bengal.
Artisans and peasants were exploited for goods and revenue collection respectively, there was a sharp decline in artisanal production and agricultural cultivation.
In 1770, occurred the famous Bengal famine, wiping one-third of the population.
This decline in agriculture put the company’s income generation into danger, and thus Permanent Settlement was introduced in 1793.
The rajas and taluqdars were recognised as Zamindars, they had to collect the rent from peasants and a fixed revenue to the Company.
This was made so to ensure a regular revenue flow to the company and also to encourage zamindars to invest inimproving the land.
This system soon started facing problems, the zamindars were not investing in the improvement of land as the fixed revenue was too high and failing to pay which was made them lost their zamindaris.
Numerous Zamindaris were sold off in the auction by the company.
When at the beginning of the 19th century, the pricesin the market rose and cultivation expanded, there was an increase in income of Zamindars but not the Company ( due to fixed revenue).
The cultivators on other hands found this system as extremely oppressive, the rent was high and the land rights were insecure.
The cultivators had to take loans from the moneylenders, failing to pay back of which would lead to eviction from the cultivating land.
The company now wanted to change the system and the fixed revenue, as they wantedto generate maximum profits.
This system was introduced by an Englishman Holt Mackenzie, and it came into effect in 1822.
He had realised the importance of village in the north Indian society and thus needed to be preserved.
The estimated revenue of each plot within a village was added up to calculate the revenue of that each mahal (village) had to pay, and this value will be revised periodically unlike permanent settlement.
The collection of revenue and payment to the company was done by the village headmen.
In the south, the movement from permanent settlement happened towards the ryotwari system.
It was tried on some territories won by the company from Tipu Sultan, by captain Alexander Read and further developed by Thomas Munro, later it was expanded to whole south.
Munro and Read realised that there were no traditional zamindars in thesouth, and hence the traditional cultivators (Ryots) are the ones to made settlement with.
Britishers thought of acting as paternal father figures protecting ryots under their charge.
All the systems did not perform as they were supposed to, neither the peasants had profited from that.