ACD : operation success but the pat(i)ent dead? Hope we will not score self-goal!

My mind started roaming, on hearing about MR's announcement in the Parliament. Insurmountable problems of different kind arise for bureaucracy to deliver now...

Usually, it would take three months for the budget orders to be issued. Then generally the GMs of railways will have to call for offer of rates from the Konkan Railway or the Railway Board may fix a kind of rate contract like DGS & D rate contract type with Konkan Railway. Being a PSU, Ministry has the power and precedent to place such orders particullalry when the product is covered by patent rights and is a proprietary item. Even for construction works Raliway Ministry places single cost plus orders for projects worth Rs 5000 cr on IRCON. The J&K case is one. The idea is the PSU will follow similar processes as the government and is subject to CAG check. Mind you it is cost plus contract! But it is normal practice to help quick decisions and project progress.

But in this case the unit rates get fixed before hand through negotiations and usual checks for reasonableness.

But it is not that simple, as you will see.

Just an idea in patent needs technology inputs dedicated firmware and special dedicated software too to run on the real time operating system. The patent I got was for my algorithm of deviation count unique in the world to automatically detect change in track hardly 5 m away from each other, which otherwise is not detectable by GPS by own software.

But the communication protocols, high strength digital radio modems which can work even when they are clustered as it happens when many locos are in the yard, need quite a few innovative firmware modifications at OEM premises abroad, and dedicated protocols also happen to be a a serious requirement, which only a dedicated private enterprise with commitment and competence can achieve. In this manufacturing technology, the real time operating system, fine tuning various parameters, are not covered by our patents. This remains property of the company.

It is not one time payment and delivery of software in this case, but a constant integrated development process involving both hardware, firmware too.

So choosing technology partner is crucial. A contest I held in 1999 by offering to compensate only up to Rs 5 lacs and within three months to produce a proto-type which can in pairs can communicate with one another and exchange information about status of each other, then indicate action to brake on a screen. Tests in inital stage were on two road based jeeps/sumos/Gypsies etc.

There companies I offered , the Tata Unysis at that time, the Motorola, and the Kernex. Both Kernex and Tata Unysis were working in Konkan Railway at that time for implementing the wide area networked railway application package.

I personally gave the technical directions and on teleconference was the mode and direct clearance to every step was taken by me including guidance to each of the companies. Motorola did not participate finally. But the other two did produce prototypes.

The cost also was a factor. Only Kernex succeeded and their prototypes were successfully demonstrated at Madgaon even to the Minister at the end of the three months, though the system was experimental. But others failed.

But those were very preliminary units but, did work. Then MOUs were signed to be partners with long term stakes sharing risks of failure.

For the portion of software development as directed by the Konkan Railway, the man-hours spent were compensated after justifying on the basis of function point analysis, practically creating an outsourced software development center for Konkan Railway. At the salary compensations needed for software professionals, Konkan Railway PSU scales cannot afford to have direct employment. Turn over risks are high too.

Then the company had to procure suitable hardware and do any firmware changes at their cost while we only pay for the hardware. The intellectual property they create in their firm ware, remained unpaid.

Further the company was persuaded to just cover the costs and not factor in risks of failure of the research project reaching commercial implementation stage,where loss of capital too was involved.

We used to check independently the direct market unit rates for all the components by calling for quotes to cross check what the company is invoicing us. For the software we paid by logged man hours and matched with function point analysis and prevailing industry standards.

So IP rights involved and their in house manufacturing experise in developing the product, was not covered.

Instead we bargained to have full control over their IP rights too, by offering exclusive manufacturing rights, while Konakn Railway controls the marketing rights within the country. We allowed them rights to market the product abroad, but on payment of royalty to Konkan Railway , sum to be mutually agreed upon.

To protect Konkan Railway interest of not to get their technology stolen once proven, even by the Kernex, such conditions were laid down, by denying them rights to sell on their own. Additionally all the software, quality control checks, verified by independent government software testing center at Chennai , has been preserved and stored in a locker with a joint operation condition during the currency of these multiple MOUs governing relations between Konkan Railway and Kernex.

In fact all the capital required to set up the facilities practically dedicated for Konkan Railway use, is not paid for by the Konkan Railway. The risk and cost of this capital was borne by the private company. Only if commercial implementation takes place they have chance of recovering the costs.The public of India who invested in the equity have taken the risk.

This way reasonableness of what we pay was assured while avoiding incurring capital outflow from Konkan Railway while keeping the development costs to Konkan Railway the least possible.

For the Konkan Railway and the Government this is the most advantageous arrangement.

To establish reasonableness of the cost of the product, the Konkan Railway, independently should get quotations from multi-vendors from suppliers of the hardware components from international manufacturers and evaluate the bill of materials going in to manufacture of an ACD, and then add costs of testing, assembly and production of the ACD , add costs of software, and testing to be ready for installation. This exercise should be done totally not taking the data or records of Kernex, so that Konkan Railway will have the real value of the product. Now this can be compared to the cost at which Kernex is offering. This will make it easier and rational for the Konkan Railway to certify for reasonableness of the cost offered.

Further foreseeing a condition of the company being purchased by some MNC and changing the ownership, to steal the technology, a special provision is put in place where, the technology papers stored in the bank locker will become sole property of Konkan railway.

At the same time if there is no commercial implementation by the Ministry, then there is little compensation to the private company. Konkan Railway has nothing to lose nor obliged to compensate.

At the same time if Konkan Railway gets the order, then Kernex certainly has a right to execute on exclusive basis.

Actually the product is a joint product of Konkan Railway and Kernex. One cannot deliver without the other.

Kernex had to go for IPO after proving the viability of the product in Jalandhar trials and based on announcements in the Parliament about extending the ACD to NF Railway, to raise almost Rs 100 cr to create facility to produce minimum of 500 units a month. They did create this infrastructure based on these MOUs. SO it is widely distributed equity and stake holders are people of the country. Initially a few dedicated NRIs from USA supported during the development stage who are idealists to see a new technology developed from our country. They took the risk before the IPO.

SO Konkan Railway Controls all marketing rights and Kernex cannot sell on their own.

The creation of such stakes, I thought will give a fair amount of motivation for both to continue the long winding process of development while patiently handling the trials and tribulations inherent in such technology development.

During my tenure as well as after I retired, inquiries were held as to whether undue favour was shown to a private party.

Foreseeing the same, I had placed on record a technology development policy to unlock value of intellectual property that I donated to the Konkan railway. The patents remain only on paper unless converted as a commercial product.

Intelligent live products combining communication, on board computing & analysis in real time, with requirements being defined and modified by the user region wise and during the operations, changing yards additional yards, and changing rolling stock all add up to a continuous on line service and maintenance of the loaded software of the ACDs.

Railway domain knowledge is specialised and it takes years to absorb for functional requirements in operations to be picked by non-railway private agencies. It is close to impossible to have another agency as in case of a non-live mechanical product. In case of latter, we can have many a supplier with simple licensing.

So it is in Konkan Railway interest as well that of Kernex to protect the technology from poaching by others. It is difficult to have such tight control if multiple players are involved.

After a detailed inquiry , the Railway Board was satisfied and closed the case.( 2005-06) Else attempt was made to throw a few needles of suspicion at my structuring the deal.

So supporting dedicated facility to monitor health of all the ACDs riding on locomotives, the constant vigilance remotely, and provide patches and upgrades to meet any bugs which may arise in some peculiar situations, and then invest in to next generation product for which the road map has already been laid out by me are all requirements only one dedicated partner can provide.

This way an Indian company will finally be able to compete with foreign technology companies which very jealously guard their turf from others. Our country will then be able to export our own solutions.

But I do have some lurking doubts if the lobby in Railway Board will raise the bogey of multiple suppliers etc as is usual for routine non-technology intensive products as per procurement rules under stores code. That is another way to sabotage the technology.

Simple clerical enforcing precedents and rules do win often in our system, creating some vague fears around of misdeeds.

First to deal with proprietary articles covered by patent law of the land, there is special provision for procuring such material. No tenders are needed. The benefit of exclusive right to sell remains for 15 years from the date patent is sealed. It is this exclusive right earned by Konkan Rialway by assigning of my patent, that can be bartered and shared to create a value proposition to rope in private capital and expertise not available with Konkan Railway to take the technology development forward and unlock the value of the patent to make it fit for commercial adoption.

It can be better understood as a typical deemed Public-private participation drawing upon mutual strengths, to develop a sophisticated technologically world's first product in our country.

I did not call it as such earlier, but in principle that is what it is. My experience in railway is that, if you say so, immediately many jump in to the fray saying we first need to make a policy and form a committee etc. But the real working model which I evolved basically took care of public interest while giving the necessary motivation to to the private party, to invest, be committed as stake owner, while taking a major portion of risk.

To Indian Railways it is a typical public-private route of technology development where major portion of risk was transferred to private party but benefits go to a PSU Konkan Railway, while Indian Railways benefit from world class product by roping in private sector's strengths to supplement Railways' domain knowledge.

The ACDs are joint product of Konkan Railway and Kernex and Konkan Railway controls the sale , by giving exclusive right to manufacture to Kernex, who are made to part with their IP rights of manufacture to Konkan Railway, further make all capital investments needed and produce the same to costs to be verified by Konkan Railway so that industry standard return is assured to the widely held equity by people of India.

The way to create multiple vendors has to be laid down too. Once the initial minimum order for supply of the proven product on commercial scale is completed by the Konkan Railway and Kernex, then, they can transfer the technology to different vendors in the country or abroad, while sharing the royalties together. This is because for transfer of technology , both Konkan Railway and Kernex together have to do, and to be frank, role of Kernex will be a major one, and they can accordingly share the royalties proportionate to their contribution. The continuity of the Public private model with Kernex, can proceed further to continuously develop and improve the product finally to reach SIL levels required in future.

The successful development of the world class new technology of ACD by India, vindicates the process adopted. The world's breakthrough technology is active every meter of railway tracks to protect lives and railway property, improving safety levels many orders more, while protecting the investments already made in existing signal systems. We can now build on this to bring out even more advanced product.

Frankly speaking I was lucky that the NRIs who guided the Kernex at development stage, were idealists thinking to make our country a great technology leader, like me, and so allowed the company to take this risky step which is actually loaded very much in favour of Konkan Railway and can hurt the private party badly.

Of course as the time progressed, they were quite a frustrated lot and staring at serious losses because of delays and uncertainties which followed. More than 300 engineers were laid off and many are working with severe cuts in pay!!

The company has been struggling and if they now get this order, then their decade old dedication is worth it. But the financial suffering all these years by this company does have an impact on any fresh private company taking similar risks.

This announcement therefore, is a milestone in our country's first undeclared but successful public-private research and technology development initiative to produce the technology.

But there is one serious hurdle for the Konkan Railway to cross.If Konkan Railway thinks on the line that Kernex is vendor then they have insurmountable problem The MOUs do not provide for that type of classification because it is actually structured as a public-private participation model. They make sense only together but not separately.

But the problem of guidelines of CVC that a PSU cannot deal with only a single vendor without open bids etc., can drive the organisation in to jitters. What if some one accuses the officers of a scam and starts hounding? Why not do nothing and take home pension, could be the natural reaction.

The entire model needs to be properly understood in perspective in the interest of the nation.

Confusing an equal technology partner who has to contributes in technology terms innovating in firmware modifications and adoption, with a simple contractor, who executes your design and specification like a machine part, is a very serious mistake. The CVC guide lines cannot be applied blindly for this research development model.

Best is to send all these papers to CVC as well as CAG now itself, so that you clear the air. Let them scrutinise and be briefed on any clarifications, instead of getting frightened of their probable future adverse appreciation of the case.

Courage to be right and say the right thing openly is how we can assure clean governance.There is nothing secretive about the fair processes to be followed. Best is to work in open transparent manner, which is what I believe.

People underestimate the open and sincerely committed intelligent Indians manning our vigilance and CAG as well as CBI. Actually many executives, try to use their fear in the system, to avoid doing any thing positive, being really lazy and lacking self-confidence to act, and who are sure that acts of commission only are punishable but not acts of omission, under present government rules. Such non-performers are assured of clean records, regular salaries and pension benefits.

A wrong step now can result in serious violations of the agreements and give rise to legal battles with real risk of the Kernex collapsing while taking down Konkan Railway too forcing compensations to be paid as punitive penalties of substantial order, to Kernex. ACDs end up in courts of law.

In the process the hard work of intellectual property created by Konkan railway and Kernex will go down the drain. India is the loser.

The nation will continue to pay heavy cost in terms of losing more lives on the railway tracks in avoidable train collisions, even after joint efforts of public and private expertise produced a technology breakthrough in the world, the intelligence based ACD network struggling over a decade.

Then it is a case of operation success but the pat(i)ent dead.

I hope not.

I am a mere observer and wonder what happens, next. I do not know how Konkan Railway or Kernex or Railway Board will handle themselves now.

My prayer is that better counsel will prevail both in Konkan Railway and Railway Board. Else we can forget about the ACD.

Time only will tell.

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