Urbanization in India has increased significantly, consistent with the world-wide phenomenon. Undesirable outcomes that have reached alarming proportions as a result of the urbanization are denial of access to safe drinking water, sanitation, and adequate waste management for a substantial portion of the country’s urban households. We examine the provision of infrastructure in India’s urban areas by examining the costs of providing these services, an issue ignored until now. Time-series data over 1991/92 upto 2003/04 and cross-sectional data on the actual capital and operating expenditures incurred by six of India’s major cities, are gathered on the basis of field visits, discussions, budgets, and other documents. We estimate the marginal cost of providing water supply. When the low-spending cities are excluded, we find that the supply of every additional kilo litre of water imposes extra burden on the cities ranging from $0.06 to $0.11, as marginal operating costs. This, while being lower than the evidence from the literature, of course excludes the capacity costs of creating assets such as civil works and plant/equipment needed to supply water. Even based on these short-run marginal cost estimates, we find some Indian cities such as Jaipur and Pune are under-charging their water. As far as the other services are concerned, cities’ per capita expenditures on basic services such as toilets (let alone street lights) appear to be abysmally low, let alone adequate in any sense to meet the demands of an increasing population. Further, spending alone is not sufficient, since operations and maintenance expenditures might just mean increased salaries without improving service levels. So we find weak municipal finances might still be the core of the issue.