Can you explain the story of how Sai Baba lit lamps with water?

Certainly. As detailed in Chapter 5, Sai Baba had a great love for lighting lamps and would daily ask local shopkeepers for oil. The grocers grew tired of this and conspired to refuse him. When they all said no, Baba quietly returned to the mosque. He took his tin pot, which had a tiny bit of oil, poured water into it, and drank the mixture as an offering. He then filled the lamps with plain water, soaked the wicks, and lit them. To the amazement of the watching grocers, the lamps burned brightly all night long, demonstrating Baba's divine power and causing the shopkeepers to feel deep repentance for their actions.