Revenue Farming in Colonial India

Revenue farming (Ijaradari system) is a fiscal arrangement where the state auctions the right to collect land revenue to the highest bidder, known as a revenue farmer or Ijaradar. The revenue farmer paid a fixed, predetermined sum to the treasury while keeping any excess collection extracted from cultivators as profit. The practice existed in Mughal India, gaining widespread prominence during the 17th and 18th centuries under later Mughal emperors like Jahandar Shah and Farrukhsiyar. As central Mughal authority weakened, provincial governors (Nawabs) in Bengal, Awadh, and Hyderabad expanded revenue farming to quickly fill state coffers.

Adoption by the East India Company

Following the grant of Diwani rights over Bengal, Bihar, and Orissa in 1765 by Mughal Emperor Shah Alam II, the East India Company assumed revenue collection authority. Lacking administrative machinery and local knowledge, Governor Warren Hastings formalised revenue farming through the Five-Year Settlement (Quinquennial Settlement) in 1772.

Structural Working and Key Settlements

Quinquennial Settlement (1772)

Under the 1772 settlement, the British auctioned land revenue collection rights to the highest bidders for a five-year period. Traditional zamindars were often outbid by urban speculators, merchants, and moneyed speculators (banians) who had no traditional link to agriculture or rural communities.

Annual Settlements (1777–1789)

Due to widespread default by revenue farmers and financial distress in the countryside, the East India Company abandoned the five-year model in 1777. The state reverted to annual settlements (Ek-Sala Bandobast), auctioning revenue rights on a year-to-year basis. This system persisted until Lord Cornwallis introduced the Decennial Settlement in 1790, which culminated in the Permanent Settlement of 1793.

Features and Comparative Assessment

Core Characteristics of Revenue Farming

• Competitive Bidding: Estates were auctioned to individuals offering the highest annual revenue promise to the colonial government.
• Absence of Proprietary Rights: Ijaradars were temporary collection agents; they held no ownership rights over land or permanent interest in agricultural improvement.
• Extensive Speculation: Non-agricultural investors and merchants participated heavily in auctions to maximize short-term financial returns.
• Variable Assessments: Revenue targets depended on competitive bids rather than scientific land measurement or crop yield calculations.

Revenue Farming versus Subsequent Colonial Systems

Impact on Rural Economy and Peasantry

Agrarian Distress and Over-Assessment

Because revenue farmers held short-term contracts, their primary goal was extracting maximum revenue before their lease expired. They levied extra cesses (abwabs) on top of base demands. Cultivators faced immediate coercion, physical torture, and eviction upon failing to meet inflated demands.

Decline of Traditional Zamindars

The auction system disrupted the traditional social order in Bengal. Old, established zamindari families were outbid by urban speculators. When ancient estates went under the hammer, historic landholding families lost their administrative status across rural districts.

Neglect of Agricultural Infrastructure

Neither the temporary Ijaradars nor the impoverished peasantry possessed incentives or capital to invest in irrigation, land reclamation, or soil quality improvements. Unstable revenue demands led to land abandonment, reduced cultivated acreage, and recurring regional food shortages.

Key Historical Facts

Warren Hastings established the Committee of Circuit in 1772 to travel across Bengal districts and execute public auctions for revenue farming rights. The Board of Revenue was created in 1786 under Governor-General Lord Cornwallis to oversee revenue administration and replace arbitrary farming auctions with systematic assessment models. Prominent Indian merchants and intermediaries, such as Ganga Govind Singh and Kanta Babu (the banyan of Warren Hastings), accumulated massive fortunes by operating as revenue farmers and administrative agents during the 1770s. The failure of the Ijaradari system directly influenced the British Parliament to pass the Regulating Act of 1773 and Pitt’s India Act of 1784, both of which demanded stable land revenue policies in British India.