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I am an Indian citizen visiting Indonesia. I heard that India has an agreement with Indonesia to provide Visa on Arrival facility for Indian citizens. Do I have to pay for this service? If yes how much does it cost?

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You don't need a VoA, but a visa exemption (for tourism), which is free. You go directly to the immigration counter and get stamped in. The VoA costs 35$, and is for people who are visiting Indonesia for business.

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India citizens are eligible for both a Visa Exempt 30 day visit as well as a 30 day Visa on Arrival. The primary difference being a 30 day VOA can be extended for another 30 days. The VOA cost US$35, the Visa Exempt entry costs nothing.

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