The correct answer is option 1. Explanation & Key Takeaways: Dadani System: • The East India Company's policy as reflected in its regulations in the last quarter of the eighteenth century had made the weavers sink into the position of indentured workers. • Under the Dadani system, English merchants advance loans to the weavers and make it obligatory on the part of the weaver to sell their products at a price offered by the merchants. Hence, option 1 is correct. • The weavers were actually forced to sell their goods at a rate much below the market price. • As a result of this brutal oppression, many weavers were forced to give up their ancestral profession. • The impoverishment of the cotton weavers was one of the factors behind the Famine of 1770. • They were subject to a penalty of 35% on the advance if they defaulted together with repayment of the advance received. • In the normal course Indian handicrafts would have benefited from the investment of the Company to their export, but, with the balance of political power in favour of the foreigners, it had the opposite effect. • The destruction of the Indian cotton industry was mirrored in the decline of the towns and cities which were famous for their manufacture. • Cities like Dacca, Murshidabad, and Surat became depopulated. • The continued prosperity of Dacca, 'The Manchester of India,' throughout the eighteenth century and its catastrophic decline in the opening years of the nineteenth century served as the measure and symbol of Bengali's long dominance in world trade in cotton piece goods and her speedy downfall. The downfall of Dacca was symbolic. • Other important centres of the cotton trade too, met with a similar fate.