NANDU:

According to Oracle "The directories that UTL_FILE can read from and write to need to have permissions of the Oracle instance owner and the user running the package."

Run chmod 777 directory_name at the unix prompt and this might help.

Something else:

utl_file_dir=/var/tmp, utl_file_dir=/abc/test, utl_file_dir=/DB/tests

should be enough for the init.ora