The problem was partially due to my In-experience with android-emulator and partially due to my lack of AOSP understanding.
Basically when AOSP is built, the result goes to the 'out' directory located in the AOSP root (/home/mydev/AOSP/out/ in my case). All the tools and plateform tools like adb emulator fastboot mksdcard mksnapshot etc are located in a sub-directory( /out/host/linux-x86/bin ).
To set the environment( i.e. to place proper directories in system $PATH ) use the commands ". build/envsetup.sh" and lunch. Now on everything can be done the usual way( as we do with android sdk). emulator command launches the emulator. adb devices will return the list of available devices. mksdcard will create a sdcard.
For my specific problem the solution is( as suggested by ChrisStratton) to attach the sdcard image on boot up. That is done by using the following command :
emulator -sdcard MySd.img
This will launch the emulator with the MySd.img SD-Card image mounted !
This assumes you have already created the MySd.img, if not, use mksdcard command to make a Sd-Card image first. Thats All !