Revenue was thecentral issue of early British Government in India. The British were uncertain as to how much they could extract from the province without inflicting damage on it. In 1772 Hastings decided that the bestway of finding out what Bengal could afford to pay was to invite competition for the right to collect revenue for a period of five years . Where the existing zamindars or hereditary revenue managers, didnot make adequate offers, higher bids would be accepted. This so called 'farming' system was adjudged even by Hastings to have been a failure. For the rest of Hastings' administration the company negotiated revenue assessments year by year, usually within the zamindars.
As Governor of Bengal, Hastings had not only to direct the internal administrationof a huge province, but he had to contact complex diplomacy with Indian states and on occasions with other European power. hastings had no ambition to make new conquests, but he was strongly in favour of seeking influence by alliances. The Company was to be repeatedly drawn into war, beginning with a war against the Rohillas in 1774 fought to strengthenthe company's major ally in northern India , the nawab-wazir of Oudh in whose territory British troops were maintained.
In 1773 the national Government in Britain intervened to impose reforms on the East India Company. Authority in Bengal was to be concentrated in a governor general and a new Supreme Council of five. A Supreme Court, staffed by Royal jaudges, was also established in Calcutta. Hastings was chosen as the first Governor General, but three men, John Clavering, George Monson, and Philip Francis, were sent out to join the council directly from Britin.