java policy file is not recognised by Java Plugin Merlin build 48

 .java.policy file in the user.home directory (location which is pointed by the
policy tool) is not recognised by Java Plugin during the start up.
When all permissions are mentioned in the .java.policy file Java Plugin
is throwing access control exceptions in the Java Cosole and test cases which need to the local access are failing.

To reproduce the problem :

1. Install Java Plugin Merlin build48
2. copy .java.policy file from /net/sqesvr.eng/deployment3/javapolicy/.java.policy to $user.home
(Invoke the policy tool <JRE_INSTALLED_DIRETORY/bin/policytool)
(This .java.policy file has all permissions)(Attached with this
bug report.)
3.load the following applet which needs the local file access.
http://sqesvr.eng/deployment1/ws/tests/appletcache/singlejar/carch_only/plugin/single_plugin.html

access control exception is thrown in the Java Console though all permissions are specified.