Introduction
Following the Battle of Buxar (1764), Robert Clive instituted the Dual Government in Bengal (1765–1772) under the Treaty of Allahabad. The arrangement divided sovereign authority into Diwani (revenue collection) and Nizamat (police and judicial administration), effectively creating a structure of 'power without responsibility' for the English East India Company (EIC) and 'responsibility without power' for the Nawab of Bengal.
Significance of the Dual Government
The Dual System was a masterstroke of 18th-century British political pragmatism, establishing British dominance while shielding the Company from premature administrative burdens.
- Imperial Mask and Diplomatic Insulation: It allowed the EIC to wield sovereign financial authority through the acquisition of Diwani rights while maintaining the façade of the Mughal Nawab's authority. This prevented open diplomatic confrontation with rival European powers like the French and Dutch and averted premature alarm in native Indian courts.
- Institutionalized Drain of Wealth: With access to Bengal's massive agricultural surplus, the Company ceased importing bullion from Britain to finance trade. Instead, territorial revenues were utilized to purchase Indian goods for export, fundamentally converting commercial trading into institutionalized colonial extraction.
- Administrative Economy: The Company avoided the heavy costs and logistical complexities of maintaining a formal civil administration by outsourcing tax collection to local intermediaries, including Deputy Diwans Mohammad Reza Khan in Bengal and Raja Shitab Rai in Bihar.
Reasons for the Ultimate Failure
Despite serving short-term imperial interests, the division of power generated deep structural crises that made the system unviable.
- Administrative Anarchy and Confusion: The complete divorce of revenue extraction from administrative responsibility paralyzed law enforcement and justice. The appointment of British Supervisors in 1769 across Bengal districts worsened the crisis, as these officials focused on monopolizing private inland trade rather than checking rampant administrative corruption.
- Predatory Extraction and Agricultural Ruin: Operating under revenue bidding arrangements, Indian intermediaries extracted exorbitant taxes from ryots. Peasants and artisans faced unrelenting coercion, undermining the traditional rural economy and drying up productive capacity.
- The Great Bengal Famine (1769–70): A severe crop failure paired with relentless revenue collection caused widespread starvation, claiming an estimated one-third of Bengal's population. In spite of the catastrophe, Company officials strictly maintained or raised revenue demands, highlighting the callousness and dysfunction of the dual structure.
- Financial Insolvency of the Company: Rampant private trade and corruption by Company servants led to private fortunes alongside corporate insolvency. The EIC was pushed to the brink of bankruptcy, compelling it to petition the British Parliament for a financial bailout.
Conclusion
Recognizing the systemic breakdown, Warren Hastings abolished the Dual Government in 1772, bringing Bengal under direct Company administration. The administrative and humanitarian catastrophe forced the British Crown to pass the Regulating Act of 1773, formally inaugurating parliamentary oversight and constitutional control over British territories in India.