The prestigious annual award recognises contribution to Indian literature.
Murugan will receive the award for "Madhorubhagan", the novel for which he had earned the wrath of local groups forcing the author-poet earlier this year to withdraw himself from writing.
"The ILF award for Madhorubhagan is a modern recognition given to Tamil, a classical language with a long and unbroken literary tradition. This recognition, bestowed on my language at an unfortunate moment, will, I hope, be a shining gem rather than an unsightly wart," Murugan said in a statement.
Previous winners of the award include Hindi author Ashok Vajpeyi, Gujarati author Chandrakant Topiwala and Odiya writer Sitakant Mahapatra.
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The jury for the award was chaired by K Satchidanandan and included Sachin Ketkar, Manglesh Dabral, Mitra Phukan and Arundhati Subramaniam.
Murugan has written nine novels and four collections each of short stories and poetry. Three of his novels have been translated into English -- "Seasons of the Palm", shortlisted for the prestigious Kiriyama Prize in 2005, "Current Show" and "One Part Woman" (Madhorubhagan).