On 12 August 1765, the Mughal emperor appointed the East India Company as the Diwan of Bengal.
As the Diwan, the Company became the chief financial administrator of the territory it controlled.
The Company needed to organize revenue resources to meet its growing expenses.
Initially, the Company prioritized its trading interests, wanting large revenues without setting up a regular system for collection.
Revenue collected from Bengal was used to finance the purchase of goods for export.
The Bengal economy faced a deep crisis, with artisans deserting villages and agriculture showing signs of collapse.
A terrible famine in 1770 killed ten million people in Bengal, wiping out about one-third of the population.
To improve the economy, the Company introduced the Permanent Settlement in 1793.
Under this system, rajas and taluqdars were recognized as zamindars who collected rent from peasants.
The revenue to be paid to the Company was fixed permanently and was never to be increased.
The Permanent Settlement created problems as the fixed revenue was very high, and zamindars did not invest in improving the land.
Many zamindars lost their lands as they failed to pay the high revenue to the Company.
The Mahalwari Settlement was introduced by Holt Mackenzie in 1822 in the North Western Provinces.
In the Mahalwari system, revenue was calculated for each village (mahal) and was to be revised periodically.
The village headman was made responsible for collecting revenue in the Mahalwari system, not the zamindar.
In the South, the Ryotwari system was developed by Thomas Munro.
Under the Ryotwari system, the revenue settlement was made directly with the cultivators (ryots).
These new systems also failed as the revenue demand was too high, forcing peasants to flee the countryside.
The British realized they could also force Indian peasants to grow crops that Europe needed, such as indigo and opium.
India became the world's biggest supplier of indigo, a plant used to create a rich blue dye.
The demand for Indian indigo grew massively due to the industrial revolution in Britain and the expansion of cotton production.
There were two main systems of indigo cultivation: nij and ryoti.
In nij cultivation, the planter grew indigo on land he directly controlled using hired labour.
Nij cultivation was difficult to expand as it required large, fertile plots of land which were already densely populated.
Under the ryoti system, planters forced peasants (ryots) to sign contracts (satta) to grow indigo.
Peasants got cash advances but were forced to cultivate indigo on at least 25% of their land, often the most fertile parts.
The price paid to peasants for indigo was very low, and the cycle of loans never ended.
Indigo plants had deep roots that exhausted the soil's fertility, making it unsuitable for growing rice afterwards.
In March 1859, thousands of ryots in Bengal rebelled, refused to grow indigo, and attacked factories in what is known as the "Blue Rebellion".
The British government set up the Indigo Commission, which found the planters guilty of using force and declared indigo production was not profitable for ryots.
After the revolt, indigo production collapsed in Bengal, and planters shifted their operations to Bihar.
In 1917, Mahatma Gandhi visited Champaran in Bihar, marking the start of the Champaran movement against indigo planters.