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use strict;
use XML::Simple;
...
#@{ $xml->{'policies'} } = sort { "\L$a->{name}" cmp "\L$b->{name}"} @
+{ $xml->{'policies'} };
print Dumper($xml);
$xs->XMLout($xml, outputfile => "policies1.xml", attrindent => 1);

<policies>
  <New name="Test3"
...
             description=""
             link_name="General Admit to GPRMC.doc" />
</policies>