The award comprises a sum of Rs 1,50,000, citation and a statuette.
The 72-year-old maestro is being conferred the honour for his artistic excellence and contribution to the Indian film music industry, state Tourism Minister A P Anil Kumar told reporters here last evening.
A recipient of the Padma Bhushan, Tamil Nadu-born Ilayaraja is hailed for raising the bar of mainstream music by fusing Indian folk music with various elements of Western classical to create a new genre that is hugely popular across regions and generations.
A panel, comprising vice-Chancellor of the Malayalam University and the former Chief Secretary K Jayakumar, senior Journalist Gouridasan Nair, Kerala Tourism Secretary G Kamala Vardhana Rao and Tourism Director P I Sheikh Pareeth, selected the legendary musician for the honour.
Anil Kumar also released the Nishagandhi brochure for 2016 and inaugurated the 30-sec promotional video of the fest.
The eight day-long Nishagandhi festival will begin this year with classical sitar concert by Anoushka Shankar, the daughter of legendary instrumentalist Pandit Ravi Shankar.
There will also be a food festival, organised by the Kerala Tourism Development Corporation.
Tourism Director Sheik Pareeth said the department is coming up with a package that includes trade, tour operators and airlines for the benefit of international audience who wish to be a part of the festival.