The inaugural competition is being organised by 'Celebrate India' group, an Indian organisation mainly responsible for conducting Diwali celebrations here.
The function is also being held with the support of state education department and Indian Consulate of Melbourne.
The contest would be open for all primary year students from the 5th and 6th standard.
Announcing the competition details last night, the Consul General of Melbourne, Manika Jain said, "This is an initiative we would be keen to see at national level here. For this year, the Consulate is sponsoring the second and third prizes for the winners of the contest which would be specially compiled on literature of India for primary students."
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"The contest would be held from July 30th to September 20th in almost 5,000 schools. The first winner would receive two return tickets to India sponsored by Air India and travelling allowance of Rs 50,000," said Arun Sharma, Chairman of Celebrate India.
All state schools including both private and public would pick the best 10 entries received and submit them to the judging panel of the organisation who will select the top three essays.
Apart from this, the school with the most entries will also win a six-week Australian Football League (AFL) leadership program which include a visit by an AFL player.
Every school would be receiving a teacher's resource kit that would assist entrants to explore the topic of Diwali and Christmas available on several websites.
"The initiative is being fully supported by the state education department. This is a unique idea. Schools can take this as their multicultural project and win an award as well," Sharma said.