By 1813 when renewal of the Company’s charter was due there were elaborate discussions about the justification of the commercial privileges enjoyed by the company. The extent of the company’s territories in India had so much expanded that it was considered to be impossible for it to continue both a commercial and political functionary. Englishmen demanded a share in the trade with India in view of the new economic theories of laissez faire and the continental system introduced by Napolean.The Englishmen demanded the termination of the commercial monopoly of the company. The Act of 1813 renewed the charter of the East India Company for 20 years.
The company was deprived of its monopoly trade with India but she was to enjoy her monopoly of trade with China for 20 years. Trade was thrown open to all British subjects the company retaining only its monopoly over tea and the china trade. While offering the company’s right to the territorial possession and revenues of India, the Act proclaimed the sovereignty of the crown over them. The Indian administration was asked to maintain separate accounts for its commercial and political activities.
The Directors kept their rights of patronage but all important appointment were henceforth to be subject to the approval of the crown. The Act marks the beginning of an ecclesiastical establishment in India for missionaries were now permitted to settle in the country. An educational policy was also initiated by the grant of Rs one lakh out of the Company’s Indian revenues for the encouragement of education, literature and science. Local governments of India were given the right of levying taxes on their subjects and punishing those not paying them.