British India

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The Regulating Act for India, 1773

By 1773 the East India Company was in dire financial straits. The Company was important to Britain because it was a monopoly trading company in India and in the east and many influential people were shareholders. The Company paid £400,000 annually to the government to maintain the monopoly but had been unable to meet its commitments because of the loss of tea sales to America since 1768. About 85% of all the tea in America was smuggled Dutch tea. The East India Company owed money to both the Bank of England and the government; it had 15 million lbs of tea rotting in British warehouses and more en route from India.

Lord North decided to overhaul the management of the East India Company with the Regulating Act. This was the first step along the road to government control of India. The Act set up a system whereby it supervised (regulated) the work of the East India Company but did not take power for itself.

The East India Company had taken over large areas of India for trading purposes but also had an army to protect its interests. Company men were not trained to govern so North's government began moves towards government control. India was of national importance and shareholders in the Company opposed the Act. The East India Company was a very powerful lobby group in parliament in spite of the financial problems of the Company.

The Act said that:

• the East India Company had to appoint an official to be Governor-General of all the districts controlled by the Company (which in 1773 comprised Bengal, Oudh and the Carnatic)
• the British government would appoint a council of four men to advise and control the Governor-General. One of the men appointed was Philip Francis, who is believed to have been Junius. This writer had attacked Grafton's ministry in the Public Advertiser between 1768 and 1770.
• British judges were to be sent to India to administer the British legal system which was used there

Warren Hastings was the first Governor-General. He had worked for the East India Company for a long time and in 1772 was the Governor of Bengal. He had a great deal of experience in Indian affairs. He set up a civil service, appointed British tax-collectors who were ordered not to take bribes, dismissed native collectors and extended British influence in India through the Mahratta Wars.

In 1774 the Council of four went to India, convinced that all East India Company officials were corrupt and inefficient. They impeached Hastings in 1785. Hastings' trial lasted from 1788 to 1795 after which he was found "Not Guilty".