sieveshell is unable to authenticate

[Ali Asad Lotia]

my imapd.conf file is:

# The various directories used by cyrus are specified below.
configdirectory: /home/cyrus/imap/config
partition-default: /home/cyrus/imap/mail
sievedir: /home/cyrus/sieve

# The sockets used by cyrus are specified below.
lmtpsocket: /var/sasl/socket/lmtp
idlesocket: /home/cyrus/imap/config/socket/idle

# The administrators for cyrus are specified below.
admins: gulkhan

# The sasl options are specified below.
sasl_pwcheck_method: auxprop
sasl_auxprop_plugin: sasldb
sasl_sasldb_path: /etc/sasldb2

# The various imapd options are specified below.
# Cyradm now takes / in place of . as a directory separator.
unixhierarchysep: yes
altnamespace: yes
quotawarn: 90
singleinstancestore: yes
duplicatesuppression: yes
hashimapspool: true
allowplaintext: no
allowanonymouslogin: no

# The ssl certificate locations are specified below.
tls_cert_file: /home/cyrus/imap/config/certs/server.pem
tls_imap_key_file: /home/cyrus/imap/config/certs/server.pem
#tls_ca_file:

i am unable to authenticate when i try to connect to localhost.

sieveshell -a gulkhan localhost
connecting to localhost
Please enter your password:
unable to connect to server at ./sieveshell line 174, <STDIN> line 1.

my logs:
May 15 10:15:18 [timsieved] attempting server step after doneflag
May 15 10:15:18 [timsieved] badlogin: localhost[127.0.0.1] CRAM-MD5 
generic failure
May 15 10:15:18 [perl] No worthy mechs found

help would be appreciated. i can authenticate to the imapd both from an 
imap client and using imtest.

any ideas what im doing wrong.

help would be appreciated.

thanks
ali asad lotia