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A subsidiary alliance, in South Asian history, was a tributary alliance between an Indian state and a European East India Company. The system of subsidiary alliances was pioneered by the French East India Company governor Joseph François Dupleix, who in the late 1740s established treaties with the Nizam of Hyderabad and other Indian princes in the Carnatic. 
The method was subsequently adopted by the British East India Company, with Robert Clive negotiating a series of conditions with Mir Jafar following his victory in the 1757 Battle of Plassey, and subsequently those in the 1765 Treaty of Allahabad, as a result of the Company's success in the 1764 Battle of Buxar. A successor of Clive, Richard Wellesley initially took a non-interventionist policy towards the various Indian states which were allied to the British East India Company, but later adopted, and refined the policy of forming subsidiary alliances. The purpose and ambition of this change are stated in his February 1804 dispatch to the East India Company Resident in Hyderabad: 
His Excellency the Governor-General's policy in establishing subsidiary alliances with the principal states of India is to place those states in such a degree of dependence on the British power as may deprive them of the means of prosecuting any measures or of forming any confederacy hazardous to the security of the British empire, and may enable us to reserve the tranquility of India by exercising a general control over those states, calculated to prevent the operation of that restless spirit of ambition and violence which is the characteristic of every Asiatic government, and which from the earliest period of Eastern history has rendered the peninsula of India the scene of perpetual warfare, turbulence and disorder...
Richard Wellesley, 4th February 1804
In a Subsidiary Alliance, princely rulers were forbidden from making any negotiations and treaty with any other Indian ruler without first making inquires to Company officials. They were also forbidden from maintaining any standing armies. They were instead to be protected by the troops of the European companies, paying for their upkeep. 
By the late 18th century, the power of the Maratha Empire had weakened and the Indian subcontinent was left with a great number of states, most small and weak. Many rulers accepted the offer of protection by Wellesley, as it gave them security against attack by their neighbors. 
- The ruler will not keep an army of his own
- British troops would be stationed permanently in the Indian ruler's territory.
- The ruler would have to pay for the maintenance of these troops. The payment could be made in cash or kind, or by ceding a part of the ruler's territory.
- It was compulsory for the Indian ruler to house a British resident in his court.
- The ruler could not employ any non-British Europeans in his service or dismiss those who were there.
- The ruler could not enter into any alliance with any power without the consent of the Company.
- The ruler had to acknowledge the dominion of the British.
- The British gained dominion over important territories as subsidiary payment.
- The Indian rulers maintained large armies for the British.
- The British indirectly controlled the defence and foreign affairs of the protected ally.
- They could also overthrow the Indian ruler and annex their territories whenever they wished to.
- Other European powers had little access to the courts of the Indian rulers and could not influence them.
- Indian rulers lost their independence and were completely controlled by the British.
- Indian states became poor as the payment of the subsidies drained their resources. When the administration collapsed, the British annexed the states. (Example: Awadh)
- The high cost of maintaining the British army and the constant demands of the resident, drained the treasury.
- With British patronage and protection, the Indian rulers lost interest in the welfare of their own people who suffered great misery and oppression.
Indian rulers under British protection surrendered the control of their foreign affairs to the British East India Company. Most subordinate disbanded their native armies and instead maintained British troops within their states to protect them from attack, but that became increasingly unlikely in most parts of India as British power was consolidated.[ citation needed]
The kingdom of Awadh was the first to enter an alliance like this through Treaty of Allahabad (1765), after its defeat in Battle of Buxar (1764). Though annexation of Awadh was done on the basis of mal-governance and hence is not counted under the subsidiary alliances. Tipu Sultan of the Kingdom of Mysore refrained from doing so, but after the British victory in the Fourth Anglo-Mysore War in 1799, Mysore became a subsidiary state before coming under Company rule.[ citation needed]
The Nizam of Hyderabad was the first to accept a well-framed subsidiary alliance in 1798. After the Third Anglo-Maratha War (1817–19), Maratha ruler Baji Rao II also accepted a subsidiary alliance.[ citation needed]
The Holkar State of Indore was the last Maratha confederation to accept the Subsidiary Alliance in 1818.[ citation needed]
- Adrian Carton (6 August 2012). Mixed-Race and Modernity in Colonial India: Changing Concepts of Hybridity Across Empires. Routledge. pp. 47–49. ISBN 978-1-136-32502-1. Retrieved 4 June 2018.
- Charles Lewis Tupper (1893). Our Indian Protectorate. Longmans, Green and co. pp. 36–41. Retrieved 5 June 2018.