Sikkim-born Parajuly "The Gurkha's Daughter" and Meghalaya-born Pariat's "Boats on Land: A Collection of Short Stories" are in contention for the Euro 25,000 award, regarded as the world's richest prize for a short story collection.
A shortlist of up to six books will be selected in late May and the winner will be announced in July.
In "The Gurkha's Daughter", Parajuly blends rich colour and vernacular to paint an eye-opening picture of a unique world and its people.
Jhumpa Lahiri is the only Indian to have won the award for her "Unaccustomed Earth" in 2008.
Among other authors in the longlist are previous winner Ron Rash, previous shortlistee Peter Stamm, Hollywood actress Molly Ringwald and recent winner of the Sunday Times Short Story Award, Junot Diaz.
The award is in memory of renowned short story writer late O'Connor and is presented in his hometown of Cork in Ireland.
The award, into its ninth year, will be presented at the culmination of the Cork International Short Story Festival in September.
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