In a major setback for the Indian government, the country's highest judiciary, the Supreme Court, has asked it to explain its stand on the alleged coal scam.

The apex court also gave the government eight weeks to explain "if guidelines were followed while allotting the natural resource", following a public interest litigation filed before it.

"What were the guidelines (for allotting coalfields) and whether any guidelines were flouted during the allocation process. Is it a coincidence that the relatives of politicians benefited?" a two-judge bench of Justices RM Lodha and Anil Dave asked the government Friday.

In August, India's independent government auditor, the Comptroller and Auditor General of India, has claimed that the country lost 33 billion U.S. dollars by selling coalfields to private parties at low rates and without auction between 2005 and 2009.

The scam, dubbed as "coalgate" by the opposition parties, dominated the Monsoon session of Parliament which could not function as the Bharatiya Janata Party demanded the Prime Minister Manmohan Singh's resignation over the scandal.

Singh, who was also the country's Coal Minister between 2004 and 2009, however, has been exonerated by the government auditor. He also denies any wrongdoing and has refused to quit.

Last week, the Coal Ministry scrapped the allotment of four coal blocks saying that they had not been developed on schedule. Earlier this month, the country's premier probe agency, the Central Bureau of Investigation, had raided the premises of five coal companies across 10 cities in this connection.

India is one of the world's largest coal producers.