Guys, I have done this many times. Local repo means yum should look to the local directory not RHN...
Anyway I have fixed this issue.... The problem was the name of the repo "/etc/yum.repos.d/myownrepo". just renamed it myownrepo to myown.repo it is working now. Actually yum looks /etc/youm.repos.d/*.repo and look which repo is enabled.
Have a look below

# yum install squid
Loading "rhnplugin" plugin
Loading "security" plugin
This system is not registered with RHN.
RHN support will be disabled.
localinfo 100% |=========================| 951 B 00:00
primary.xml.gz 100% |=========================| 729 kB 00:00
localinfo : ################################################## 2115/2115
Setting up Install Process
Parsing package install arguments
Resolving Dependencies
--> Running transaction check
---> Package squid.i386 7:2.6.STABLE6-3.el5 set to be updated
--> Finished Dependency Resolution
Dependencies Resolved
================================================== ===========================
Package Arch Version Repository Size
================================================== ===========================
Installing:
squid i386 7:2.6.STABLE6-3.el5 localinfo 1.2 M
Transaction Summary
================================================== ===========================
Install 1 Package(s)
Update 0 Package(s)
Remove 0 Package(s)
Total download size: 1.2 M
Is this ok [y/N]: y
Downloading Packages:
Running rpm_check_debug
Running Transaction Test
Finished Transaction Test
Transaction Test Succeeded
Running Transaction
Installing: squid ######################### [1/1]
Installed: squid.i386 7:2.6.STABLE6-3.el5
Complete!

Cheers