3.1 The Company Becomes the Diwan

In this subtopic, we study how the British East India Company transitioned from being a commercial trading entity to becoming a political and administrative power in India. This shift played a crucial role in the establishment of British control over the Indian subcontinent.

By the mid-18th century, the British East India Company was not just involved in trade, but had started to establish political and military control over large parts of India. The Battle of Plassey (1757) and the Battle of Buxar (1764) marked the British East India Company's increasing influence in Indian politics. These victories helped the Company to assert its dominance, and soon it began to take on more administrative responsibilities.

In 1765, the Mughal Emperor, Shah Alam II, granted the British East India Company the right to collect revenue from the Bengal region, which included the present-day West Bengal, Bihar, and Odisha. This right was formalized when the Company was appointed as the "Diwan" (chief revenue collector) of Bengal. The term "Diwan" had traditionally been used for the person who collected land revenue for the Mughal Empire. By becoming the Diwan, the East India Company had effectively gained control over the financial resources of Bengal, which would later have far-reaching consequences.

The transition to becoming the Diwan of Bengal marked the beginning of British rule in India. The Company now had the authority to collect taxes, maintain law and order, and influence the administration of the region. This change was formalized through a document known as the "Diwani" grant, and it gave the Company a monopoly over the revenue of one of the richest provinces in India. With the revenue collected from Bengal, the British East India Company could finance its military operations and further strengthen its hold over India.

The Company's appointment as the Diwan had a significant impact on the administration of Bengal. The Company introduced a new system of revenue collection, which was based on the Permanent Settlement (1793) introduced by Lord Cornwallis. Under this system, zamindars (landlords) were made responsible for collecting taxes from peasants and paying them to the British East India Company. In return, zamindars were granted the right to own the land, but they were required to pay a fixed amount of revenue every year. This system was designed to generate a steady income for the Company, but it also led to the exploitation of peasants, who were often unable to pay the high taxes.

The British East India Company's control over Bengal's revenue also helped it expand its political influence. The Company used the revenue collected to fund its military expeditions and to suppress any opposition to its rule. By the early 19th century, the Company had extended its control over most of India, and it became the dominant political force in the subcontinent.

The role of the Company as the Diwan marked a major shift in Indian politics and economics. It allowed the British to control the flow of wealth in India, and the wealth generated from the land became a key factor in their continued domination. This laid the groundwork for the British Empire's rule over India, which would last for almost two centuries.

The revenue system and the political changes introduced by the Company had long-lasting effects on the Indian society and economy, which would later contribute to the growth of Indian resistance against British rule.