Institgating an adjournment debate in the House of Commons, Colchester MP Bob Russell said the institute's shortsighted policies would leave residents with severely restricted educational options.
The institute has announced the axing of full-time A-level courses, and more than 50 jobs will be lost.
Mr Russell called on lifelong learning minister Malcolm Wicks to intervene and use "all the powers at his disposal" to prevent the institute proceeding with its plans. He wanted ministers to investigate the management and strategy of the institute.
NATFHE, the lecturers' union, has passed a vote of no confidence in the senior management team. The principal, Helen Parr, leaves at the end of the academic year to head another college.
"The Colchester Institute sees its skipper jumping ship while the vessel remains all at sea, with the crew and passengers wondering about the direction in which it is sailing and unsure of the ultimate destination," said Mr Russell.
"I object to the fact that the comprehensive provision of education opportuities appears to be of secondary importance to operating the institute as if it were a business, such as a supermarket, with areas of profitability being encouraged and those perceived to be less profitable either closed down or sidelined.
"Education should not be run on the philosophy of 'pile 'em high, sell 'em cheap.' " Replying, Mr Wicks said the previous Conservative government had made colleges independent so that ministers could not interfere in their business affairs.
The college was in financial health category A and so had the financial strength to implement its strategic plans. It had decided to concentrate on its vocational programmes, for which it had an excellent reputation. That was consistent with the Secretary of State's desire that half of all colleges should develop a vocational specialism.
"I am satisfied that the governing body has exercised its proper function. Its decisions are based on business and education considerations. Existing A-level students have been assured that they will be able to complete their studies, and there will be a choice of other local providers of full-time A-level courses for prospective students from September 2001."