India's beleaguered government won some rare relief on Saturday when a court threw out a corruption case against one its top ministers ahead of crucial state elections next week.

The court dismissed a petition accusing Home Minister Palaniappan Chidambaram of signing off on the sale of telecoms licenses at below-market prices that may have cost the government up to $36 billion (22 billion pounds) in lost revenues.

Prime Minister Manmohan Singh's Congress party, struggling against repeated accusations of graft and incompetence, faces elections starting next week in a key northern state that was once its stronghold and whose voters could set the tone for 2014 national polls.

The latest ruling can still be challenged in a higher court.

The accusations against Chidambaram relate to his position as finance minister in 2008 at the time of the corruption-tainted telecoms bidding.

It is the biggest of several scandals to have emerged during

Singh's second term, denting India's image as an investment destination and heightening concerns over policy when Asia's third largest economy is slowing.

The Supreme Court on Thursday ordered 122 telecoms licences issued under that 2008 sale be revoked.

Two ministers, including former telecoms minister Andimuthu Raja who presided over the 2008 grant process, have resigned. Raja is in jail awaiting trial.

Saturday's court ruling also removes one major political weapon from the opposition which has been unrelenting in its attacks on the government over corruption. For most of last year, opposition parties have repeatedly blocked policy going through parliament.

A major next test will be the 201213 budget for which the government is hoping to get parliamentary approval in mid-March.

(Reporting by Suchitra Mohanty, Writing by Krittivas Mukherjee, Editing by Jonathan Thatcher)