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26th FEBRUARY 2016


Marshalling resources to stay on track : Rail Budget


The Railway Budget is notable both for the absence of big-ticket schemes and for its quiet emphasis on process changes that hold the promise of ushering in long-term improvements in the viability of the Indian Railways. Given the backdrop of a shortfall in traffic receipts - exacerbated by low freight demand from the core sector - Railway Minister Suresh Prabhu's projection of savings of Rs.8,720 crore compared with budget estimates for the current fiscal year reflects a finance professional's approach in adopting austerity measures to contain costs. Building on those gains, the budget has projected that notwithstanding the substantial jump in salary and pension costs consequent upon the implementation of the Seventh Pay Commission's recommendations, the impact would be minimised to an 11.6 per cent increase in working expenses next year. This will lead to a two percentage point rise in the operating ratio. To address the resultant paucity of funds for capital expenditure, the Minister plans to step up efforts to monetise various assets, including land, and boost non-fare revenue, use the private-public-partnership model more extensively, and work jointly with State governments to both formulate and fund region- or city- specific projects. Citing the international average of 10 to 20 per cent of railway network revenues accruing from non-tariff sources, the budget sets a goal of bringing that share on a par over the next five years from the prevailing sub-5 per cent. Mr. Prabhu has rightly realised that a major challenge is to recover lost ground in freight haulage, where a persistent decline has had a negative impact not only on the Railways' finances but on the economy as well. The approach enunciated to address this spans three key tracks - expanding the freight basket by moving away from dependence on bulk commodities, rationalising tariffs to stay competitive and building terminal capacity. From containerisation to roll-on/roll-off, time-tabled freight trains, and long-term tariff contracts, the budget has posited several steps to regain the market share of the Railways in goods transportation.

Given the political constraints on resource mobilisation the Railways faces in a year of a major round of Assembly elections, Mr. Prabhu has taken a therapeutic approach to ensure a long-term solution. Aware that the success of any plans would hinge on their execution, he has spelt out initiatives to restructure operational management and processes. The Railway Board is to be reorganised along business lines with cross-functional teams focussed on areas such as non-fare revenues, speed enhancement and information technology. Seven missions to set horizon-based agendas have been proposed. While the objectives appear achievable, Mr. Prabhu's challenge will be to bring them to fruition, especially because many potential partners, including cash-strapped State governments, may be hard-pressed to find the money.

A prudent decision: Computer Programme Patenting

Can computer programmes be granted patents? On February 19, India's patent office wisely answered this question in the negative, putting an end to months of ambiguity over the patentability of computer programmes. In this process, the patent office, called the Office of the Controller General of Patents, Designs & Trade Marks, effectively reversed an August 2015 guideline that had triggered the ambiguity in the first place. Till that guideline came, India's stance on this issue had been clear through a 2002 amendment to the Patents Act: that software per se was not to qualify for patent protection. However, lawmakers also recognised that the intention must not be to reject inventions involving software that "may include certain other things, ancillary thereto or developed thereon". Experts have interpreted this exception to refer to innovations in both software and hardware. The 2015 guideline threatened to unsettle that nuance. According to that, technical advancements could be sufficient grounds on which to confer patents. Its nullification is welcome as such rules, though seemingly on the side of innovation, do not enable a level playing ground. For starters, the share of patents held by Indians has traditionally been low, and it continues to be so. Also, the field of software is dominated by corporate giants with deep pockets and significant expertise, and they can easily ‘out-patent' the others out of business. The smaller companies and start-ups - and there are far too many aspirants with that profile - then not only have to spend huge sums of money to protect their work, but they also have to be financially and operationally ready to defend themselves.

The patent office hasn't left it at just that. It has also issued a three-stage test to examine applications of computer-related inventions. Step one is to interpret the claim. Once that is done, step two is to deny the claim in case the "contribution lies only in mathematical model, business method or algorithm". Step three is to assess if the invention is claimed in the field of software in conjunction with a novel hardware. The important point to note is the recognition that software in itself is never patentable. This is a prudent stance, because there are inherent problems in figuring out if software is patentable or not. And this is true the world over. Germany and New Zealand exclude software from patentability. In many other parts of the world, the positions are nuanced, like the one taken by the European Patent Convention, which does not entertain applications when they pertain to computer programmes as such, but it does have an open mind when they lead to "non-obvious" contributions. In the U.S., a more open policy has led to a flood of patents, and consequently the negative connotation that the term ‘patent thicket' carries now. There is a more important reason for holding back software from a patents regime. And this goes back to what MIT researchers James Bessen and Eric Maskin showed many years ago: imitation promotes innovation. Patents are a hindrance here.



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