Can any one please give a hint where to define the policies in the
esoe setup. I saw few examples explained "configuring policies" guide
like the one below-

<Policy PolicyId="urn:simpletest">
          <Description>Simple Test Policy. 1 Rule. 1 Resource in 1 target.</
Description>
          <Target>
            <Resources>
              <Resource>
                <AttributeValue>/default/.*</AttributeValue>
              </Resource>
            </Resources>
          </Target>
          <Rule Effect="Permit" RuleId="1">
            <Description>Simple test Rule. Permit all at default target.</
Description>
          </Rule>
        </Policy>

In the service details page, you will see an entry like:
Service Authorization Policy  view / edit

Click on view/edit to modify the policy for that service. After you save it,
it will be picked up from the database by ESOE within the configured
interval (default is about 2 minutes, from memory).