The only palace of its kind in the whole eastern region, Neermahal was built by the Martin and Burn Company way back in 1930 in the centre of the 5.3 sq km Rudrasagar Lake.
It served as the summer resort of the erstwhile King Bir Bikram Kishore Manikya Bahadur and still draws thousands of visitors every year despite the poor condition of the lake which has become shallow because of heavy deposit of silt.
It presents a sad contrast to the Lake Palace on Pichola lake in Udaipur in Rajasthan, which doubles up as a luxury hotel.
A light and sound show was installed in the palace in 2003 by a Finnish company at a cost of Rs 1.20 crore, but for the last nine months, it has been defunct.
"The system developed some fault and there was no one to repair it," an official of the state's tourism department said.
In the past five decades, the administration's compulsion to keep the local farming community happy has also led to a degradation of the lake with water being pumped off to assist paddy cultivation after every rainy season.
The secretary of the Rudrasagar Udbastu Fishermen Samabay Samity, Satyaban Das, said, "It was in 1960 that a decision was taken to have agriculture around the lake along with fishing. The agricultural land was distributed among 600 families but it was not a permanent decision and now we believe it was not right."