The attainment of financial, environmental and social sustainability of urban service provision has become problematic nowadays. Within urban services, the supply of water and its disposal after use have become very important because water has to be brought from distant sources and the waste water needs to be treated before being discharged into natural waterbodies, both of which are very costly propositions. In dryland areas, which are physically water scarce and constitute some 70% of the country, the problem becomes even more acute. The water supply and sanitation services in the city of Indore in Madhya Pradesh are critically reviewed, and suggestions are made for alternative measures for a more equitable and sustainable water management system.