setup.py: renaming src package to project name

You could fix it by putting Python package files into proj/ directory:

proj/
  src/
    proj/
      __init__.py
      xyz.py
      abc.py
  setup.py

And changing setup.py to:

# ...
setup(
   name="proj",
   packages=['proj'],
   package_dir={'':'src'}
)

It is not required by distutils but other tools might expect the parent directory name of __init__.py file to be the same as Python package name i.e., proj in this case.