It is generally perceived that adoption of micro irrigation (MI) system leads to increase in yield; real water saving; and expansion in area under irrigation, all resulting in social benefits. But, most of these perceptions are based on research on drip irrigated farms of orchards and cash crops. Again, they looked at saving in applied water rather than actual water consumption by the crop. Thus, the social benefits tend to get over-emphasized. Since the studies were done in agriculturally prosperous regions where labour is in short supply, the social costs associated with removal of labour from farms get ignored. Thus, governments and donors are motivated to subsidize MI systems. But, many research studies in the past on drip irrigation seem to suggest that these systems are viable even when the full costs of the system are compared against the private benefit. Hence, subsidies may not be desirable from an equity perspective as it is mostly large farmers having capital who go for micro irrigation systems. The broad research question being addressed in the present study is whether subsidies are desirable for promoting micro irrigation systems in canal commands. The study was undertaken in IGNP (Indira Gandhi Nehar Project) command area where farmers have adopted sprinklers with the help of an intermediate storage system locally known as diggie. The objectives of the study are to: 1] analyze the farming systems changes associated with MI adoption; and, 2] evaluate the economic and social costs and benefits of sprinkler and diggie adoption in the region. The study shows that sprinkler with diggie is economically viable for the farmers even without subsidies. It further shows that the social benefits exceed the social costs. The study had shown that under situations of induced water scarcity, incremental income return over preadoption scenario will not be the decisive criterion for farmers to go for MI systems. Instead, the criterion would be water productivity enhancement, which also ensures that the income returns are higher than what they would probably secure with flood-irrigated crops under conditions of reduced water availability. Since the social costs are less than the social benefits, the subsidies are justifiable as it makes the private benefits exceed the private costs. The study also validates the unique methodology used for economic cost benefit analysis of micro irrigation systems. On the social cost benefit front, we have only considered the positive externality associated with water saving. The other positive externality of sprinkler adoption is reduced risk in livestock keeping. However, we have not quantified this.