The premature baby needed the incubator in order to survive and died shortly after being taken away from the life-saving machine.
The cost of the incubator: 200 rupees (about £2.30, or $3.60) for related electricity charges.
The incident occurred at a government-run facility, the Civil Hospital in Jalandhar in Punjab state, about 250 miles north of Delhi.
The baby’s father, Sanjiv Kumar, an unemployed house painter, told reporters: "We begged and pleaded with [hospital officials] to keep our child alive in the incubator and that we would pay them the money later, but they refused.”
He also alleged that nurses in the hospital removed a saline drip from the baby.
The baby’s mother, Sunita, cried to Indian media: "They (the hospital) killed my child. I pleaded that my husband needed time to arrange the money, but to no avail and the baby was taken out of the incubator."
The tragedy has led the state’s chief minister Parkash Singh Badal, to form a committee of health officials to investigate the incident. Badal also awarded £1,180 to the couple.
However, Badal has been criticized by Indian media for his overall callous attitude towards the baby’s unnecessary death.
India Today reported that Badal flippantly stated that such deaths occur all over India and that the Punjab health system should not be blamed.
“I don't point to any one in particular. The action is taken. There is no country where such incidents do not happen. We take action,” he said.
Punjab health minister Madan Mohan Mittal took a more aggressive stance.
"If what the kid's father is saying is true then strict action will be taken against the doctor. I have asked for a report within 15 days. I can assure you that no leniency will be shown to anyone. I want a fair inquiry," Mittal told reporters.
India has one of the world’s highest rates of infant mortality. In March of this year, Health and Family Welfare Minister Ghulam Nabi Azad told Parliament that 47 per thousand live births in India result in the death of the baby, a rate worse than found in such poor nations as Nepal and Bangladesh.
"Unfortunately, [infant mortality rate] and Maternal Mortality Rate in India is very bad,” he stated.
“As bad that it cannot be compared with our neighboring countries of Nepal, Sri Lanka and Bangladesh. Pakistan is the only country, India can be compared with.”