Jeet Thayil's "Narcopolis", Uday Prakash's "The Walls of Delhi" and Amitav Ghosh's "River of Smoke" are among the six authors, including a translator, who have been shortlisted for the Prize.
Others in the shortlist announced at the May Fair Hotel here last evening are Jamil Ahmad (The Wandering Falcon), Tahmima Anam (The Good Muslim) and Mohammed Hanif (Our Lady of Alice Bhatti).
The award is given to authors who write on themes such as culture, politics and history of the region.
The final prize is scheduled to be announced during the Jaipur Literature Festival in January 2013.
"The six shortlisted books from different countries represent the diversity of South Asian fiction in terms of theme as well as idiom," said K Satchidanandan, who chaired the jury for the Prize.
"We were looking for works which are thematically fresh, stylistically innovative and are a definitive contribution to novel as a genre. The choice was not easy as we had sixteen outstanding works to choose from but we were unanimous in our final choice," he said.
Muneeza Shamsie, Rick Simonson, Suvani Singh, Eleanor O'Keeffe were the other jury members of the Prize which seeks to reflect the importance of South Asia's rapidly expanding book market.
There were 81 entries for the DSC Prize this year, from authors and translators across India, Australia, UK, Pakistan, and Bangladesh.
A market report released in May this year puts India as the world's third largest English-language book market after US and UK. It is set to become the largest within the next ten years, says the report.
Thayil's book "Narcopolis", published by Faber and Faber, is a rich, chaotic, hallucinatory dream of a novel that captures Mumbai of the 1970s in all its compelling squalor. With a cast of pimps, pushers, poets, gangsters and eunuchs, it is a journey into a sprawling underworld written in electric and utterly original prose
Uday Prakash's "The Walls of Delhi" are three short stories in Hindi that pull back the curtain on life in 21st century India. A sweeper discovers a cache of black money and escapes to see the Taj Mahal with his underage mistress. An untouchable races to reclaim his life stolen by an upper-caste identity thief. A slum baby's head gets bigger and bigger as he gets smarter and smarter, while his family tries to find a cure. Translations have been done by Jason Grunebaum.
Amitav Ghosh's book "River of Smoke" is from his Ibis triolgy.
An international advisory committee comprising Arvind Krishna Mehrotra, Alastair Niven, Fakrul Alam, Ira Pande, Marie Brenner, William Dalrymple, David Godwin, Michael Worton and Surina Narula is on the board of the Prize.
In January this year the DSC Prize 2012 was awarded to Singapore-based Sri Lankan author Shehan Karunatilaka for his book Chinaman, a novel that explores cricket as a metaphor to uncover a lost life and a lost history.