Revenue Farming, also known as the Ijardari or Izaredari system, was a predatory land revenue management practice where the right to collect land revenue from a specific territory was auctioned to the highest bidder. While the system existed in various forms during the decline of the Mughal Empire, it was systematically adopted and aggressively leveraged by the British East India Company after acquiring the Diwani Rights of Bengal, Bihar, and Orissa in 1765. It served as a destructive transition phase that severely destabilized the rural economy before the introduction of regular colonial settlements.
Origin and Institutionalization under the British
Following the Treaty of Allahabad (1765), the East India Company sought to extract the maximum possible wealth from Bengal with minimal administrative overhead.
- The Quinquennial (Five-Year) Settlement (1772): Governor-General Warren Hastings formalized revenue farming by introducing a five-year auction system. Under this system, the privilege of revenue collection was auctioned off to bidders known as Ijardars or revenue farmers.
- The Annual Settlements (1777): When the five-year contracts resulted in massive defaults, widespread corruption, and agrarian distress, Hastings reverted the system to an annual auction process, which only accelerated the volatility and unpredictability of tax extraction.
Key Features of Revenue Farming
- Auction-Based Allocation: Territories were auctioned publicly. The individual or consortium that promised the highest annual cash remittance to the Company treasury was awarded the tax collection rights for that area.
- Absence of Proprietary Rights: Unlike the later Zamindari system, revenue farmers were not recognized as owners of the land. They were temporary contractors whose interest in the land expired with the contract term.
- Lack of State Regulation: The East India Company maintained no oversight regarding how much the revenue farmers extracted from the actual cultivators (ryots). The state only cared about receiving the final bid amount.
- Displacement of Traditional Landholders: Traditional Zamindars who had long-standing social ties to the villages were frequently outbid by wealthy urban speculators, merchants, and money-lenders from Calcutta, who had no interest in agriculture beyond short-term profit.
Structural Evolution of Colonial Land Revenue
The following timeline illustrates how the highly volatile Revenue Farming system acted as a precursor to the permanent and temporary land settlements of British India: [1765: Diwani Rights Granted] │ ▼ [1772-1776: Quinquennial Settlement] ──► (5-Year Revenue Farming / Ijardari System) │ ▼ [1777-1792: Annual Settlements] ──► (1-Year Revenue Farming / High Instability) │ ▼ [1793: Permanent Settlement] ──► (Shift from Revenue Farming to Absolute Zamindari Rights)
Socio-Economic Devastation of the Agrarian Economy
Revenue Farming is widely considered by modern historians to be one of the most extractive and ruinous phases of British economic policy in India.
The Logic of Maximum Rack-Renting
Because the Ijardars held the revenue collection rights for only a short, fixed period (one to five years), they had no long-term stake in the sustainability of the land or the welfare of the peasants. Their singular motive was to extract the maximum possible revenue from the cultivators during their tenure to recoup their initial auction bid and pocket a massive profit margin.
Destruction of Agricultural Capital
Since the revenue farmers were entirely temporary, they invested nothing back into rural infrastructure, such as repairing irrigation tanks, clearing wells, or providing credit during crop failures. Concurrently, the peasants were bled dry of their savings, completely halting any capital formation in rural India.
Land Abandonment and Depopulation
Faced with brutal physical coercion and impossible tax demands, entire villages of peasants chose to abandon their ancestral lands and flee into deep forests or neighboring princely states. This massive flight of labor led to large tracts of fertile land turning into fallow wastes.
Catalyst for the Great Bengal Famine (1770)
The aggressive extraction strategies, combined with the administrative chaos of early revenue farming experiments under the Dual Government system, severely crippled the food production buffer of Bengal. This structural vulnerability directly exacerbated the Great Bengal Famine of 1770, which resulted in the starvation and death of nearly one-third of Bengal’s population.
Historical Trivia and Prelims Pointers
- The Dual Government Context (1765–1772): Introduced by Robert Clive, this system separated power (Diwani and Nizamat). The Company held the revenue power but delegated actual collection to native Deputy Diwans (like Reza Khan), utilizing early revenue farming tactics to shield themselves from public accountability.
- Amils and Ijardars: In historical texts covering this period, the revenue farmers are alternatively referred to as Amils or Ijardars.
- The Supervisory Experiment (1769): The Company attempted to appoint British officers called “Supervisors” to oversee the native revenue farmers and prevent extreme extortion. However, these Supervisors were corrupt and instead colluded with the farmers to enrich themselves through illegal private trade.
- The Transition to Permanence: The absolute failure of revenue farming—marked by fluctuating state revenues, bankrupt Ijardars, and a devastated peasantry—ultimately forced the British parliament and Lord Cornwallis to opt for a fixed, long-term system, culminating in the Permanent Settlement of 1793.