hive-builtins-0.9.0.jar FileNotFoundException - hadoop

Question

I am newbie and I am trying to run a hive query
hive> SELECT xpath('<a><b id="foo">b1</b><b
id="bar">b2</b></a>','//#id') FROM src LIMIT 1;
when I execute the above command I get the following error
Job Submission failed with exception
'java.io.FileNotFoundException(File does not exist:
hdfs://localhost:9100/usr/local/hive/lib/hive-builtins-0.9.0.jar)'
Execution failed with exit status: 2 Obtaining error information
Task failed! Task ID: Stage-1
It is trying to look for hive-builtins-0.9.0.jar in hdfs. But this file is available under $HIVE_HOME/lib. why should it be uploaded to HDFS?
I have the following setting at the start of the hive
~/.hiverc
set hive.cli.print.current.db=true;
set hive.exec.mode.local.auto=true;
If I add this hadoop property in hive-site.xml then it gives me the required output
<property>
<name>fs.defaultFS</name>
<value>file:///</value>
</property>
but ideally I want to set it to
<value>hdfs://localhost</value>
as I have other hadoop specific java programs that use hdfs. What is the mistake I am making here. Is there a configuration that I need to set while starting up.
As requested $PATH information
/usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin:/sbin:/bin:/usr/games:/usr/local/games:/usr/local/hadoop/bin:/usr/local/hadoop/sbin:/usr/local/hadoop/bin:/usr/local/hadoop/sbin:/usr/local/hadoop/bin:/usr/local/hadoop/sbin:/usr/local/hive/bin
Please help.
Many thanks