The study explored the ways to obviate the need for large scale state intervention through building up of an efficient marketing system in Punjab. Paddy and wheat being the major crops of the state, occupied about three-fourth of the gross cropped area. The implementation of MSP in these crops has also been very effective during the last 2-3 decades. Therefore, the study concentrated on these two crops only. Both primary as well as secondary data were utilized for achieving the objectives of the study. The study was based on the primary data collected from the farmers, retailers and processing units of Sangrur district which is true representative of the state in terms of marketing infrastructure, marketing system, pattern of production and marketing of major crops. The reference year of the study was 2000-01. The share of government agencies in the total procurement of these two crops had almost been absolute and increased overtime. Escalating MSP and effective price policy for these crops had resulted into paddy-wheat monoculture and the government purchases lost relevance to the demand and supply situation within the country as well as its relevance to the border prices of food grains. Hence, a rational agricultural price policy needs to be formulated in line with other crops. Also, there is a need for large-scale extension efforts to change the farmer’s mindset for the quality consciousness of the produce. Paddy-wheat storage was mainly state owned and to reduce the state intervention, government should encourage private storage at the farmers’ level. There is need to provide incentives for the storage of food grains at the farmers’ level as well as with the private traders in order to reduce the dependence on the state owned storage. The farmers expressed that the private traders not only offered lower price for their produce but also delayed the payments. The marketing activities of private traders should be closely watched with respect to price and payment schedules. The high level of statutory market charges by the state government as well as other non-statutory charges in terms of gratification etc. borne by the buyers and sellers of paddy and wheat leads to market inefficiency. Therefore, there should be reduction in the statutory as well as non-statutory charges. Immediate withdrawal of such intervention by the State can prove harmful and hence, there is need to reduce the state intervention in phases. Various studies suggest that the price stabilization policies had no favourable contribution to the macroeconomic management. A preferred policy approach would be to assist producers to meet the challenges of the commodity markets and also to keep vigil on the procurement activities of private traders in the market.