The Manchester That Closed Down: Faisalabad's Textile Collapse
A city that built three generations of textile workers, watching its factories sit silent because of decisions made in 1994 by people who never visited
By Asad Baig · Lahore · April 2026 · Approx. 5-min read
What Faisalabad used to be
Faisalabad, in central Punjab, used to call itself the Manchester of Pakistan.
The original Manchester, in northern England, became famous in the nineteenth century as the heart of the industrial revolution's textile economy. Manchester gave the world its first textile factories, its first industrial workers, its first urban working class. The name "Manchester" became synonymous with textile manufacturing.
Faisalabad earned the nickname for similar reasons. Spinning mills. Weaving units. Dyeing facilities. Garment manufacturers. Entire neighbourhoods built around the rhythms of cotton and yarn. Three generations of one family in the same factory. Workers' children playing in the streets while their fathers ran the looms. By the 1990s, Faisalabad was the engine of Pakistan's largest export sector. The city's wealth was built on textile.
This article is about what has happened to that city, and why.
What has actually closed
Today, in 2026, more than 1,000 small and medium textile units in Faisalabad have shut down in just the past two years. In Punjab as a whole, at least 187 textile mills have closed. About 100 spinning mills nationally. About 400 ginning factories. Roughly 700,000 jobs lost in the textile sector. Cotton production has fallen from 15 million bales to 5.5 million (a 63 percent collapse).
The buildings of these closed factories still stand. The machines sit silent inside them. The owners cannot afford to operate them. The workers have moved to Lahore looking for construction jobs, or to the Gulf as migrant labour, or back to villages where their families try to find a way to feed them.
Walk through any neighbourhood in Faisalabad today and ask the older residents what the area used to look like. They will tell you about the daily rhythm of factory shifts. The way the streets came alive at change-of-shift times. The vendors who sold tea and parathas to workers walking home. The marriage halls that hosted ceremonies financed by factory wages.
All of that is gone now. The neighbourhoods are quieter. The economic life has thinned out. The young people have left.
Why it happened
When industry leaders are asked what caused this collapse, they give a unanimous answer.
"Pakistan's electricity tariffs for industrial use are nearly double those in countries like Bangladesh, Vietnam, and India. Industries can be run at twenty-six rupees per unit. We are being charged thirty-eight to forty rupees per unit. Why do industrial units have to foot the bill for line losses, capacity charges, and theft?"
The speaker was Naveed Ahmed, Chairman of the All Pakistan Textile Mills Association Southern Zone, in February 2025. His complaint is technical, but the substance is simple. Pakistani factories are paying significantly higher electricity tariffs than their direct international competitors. The tariff difference is sufficient to make Pakistani products non-competitive in global markets.
There were also other factors. Cotton problems. Machinery age. Demand softness. Currency volatility. But the unanimous identification of the breaking point, in interviews with chambers of commerce and industry groups, is electricity cost.
At Rs. 38-40 per unit, Pakistani textile manufacturing cannot compete with Bangladesh at Rs. 18 per unit, with India at Rs. 22 per unit, with Vietnam at Rs. 15 per unit.
I have written about the broader comparison at Pakistan vs Bangladesh Electricity Tariff and at Why Did Pakistan's Textile Industry Collapse While Bangladesh's Grew?.
What this is connected to
The Faisalabad story is connected to specific policy decisions made decades earlier.
The Mansha family's Lalpir Power Plant, in nearby Mehmood Kot, collected approximately Rs. 8-12 billion in capacity payments during the same year that 187 textile mills shut down in Punjab. The Lalpir plant operated under a 1994 Power Policy take-or-pay contract that guaranteed dollar-indexed returns of 15 to 18 percent regardless of whether the plant generated electricity.
This is not a coincidence. It is the system functioning exactly as it was designed to function. The capacity payments are a fixed obligation. The fixed obligation is paid through tariffs. The tariffs make industry uncompetitive. The industry closes. The remaining industry pays higher tariffs because the obligation is fixed and the consumer base is smaller. The cycle continues.
The families that benefit from the capacity payments do not, themselves, suffer from the high tariffs. They are paid in dollars. They keep money in offshore accounts. Their children study abroad. Their summer is in London.
The families that lose are the ones in Faisalabad whose factories are now warehouses for memories.
THIS IS THE HUMAN FACE
Of the IPP system. Not in newspaper headlines. In small workshops, family businesses, family histories that end because a tariff structure designed thirty years ago made it impossible to compete.
What can be recovered
Some of the textile capacity that has been lost cannot be easily recovered. The skilled workers have moved to other industries or other countries. The machinery has been sold for a fraction of its original value. The buildings have been repurposed or demolished. The supply chains have been rerouted to Bangladesh, India, and Vietnam.
But not all. With significantly lower industrial electricity tariffs (Rs. 18-22 per unit, comparable to regional competitors), some Pakistani textile capacity could be reopened or restarted. Some of the workers who left for the Gulf could come back. Some of the orders that flow to Bangladesh and Vietnam could come back to Pakistan.
This requires the structural IPP reforms I describe at my pillar on the IPP system. Conversion of take-or-pay contracts to take-and-pay. Forensic recovery of excess profits. Renegotiation of CPEC IPP terms. Reform of NEPRA. The mechanisms exist. The political will to implement them has been absent.
Until then, Faisalabad continues to be the Manchester that closed down.
What you should take away
Three things.
Faisalabad was the engine of Pakistan's textile industry. Today, more than 1,000 small and medium units have shut down in just two years. The neighbourhoods that built three generations of textile workers are quieter, emptier, poorer.
The cause is electricity cost, not Pakistani inferiority. Pakistani textile factories pay roughly double what Bangladeshi factories pay. The cost difference is decisive in international markets where buyers are price-sensitive.
The Lalpir Power Plant nearby collected Rs. 8-12 billion in the same year that 187 mills closed. The IPP system that produced the high tariffs is the same system that made the Mansha family Pakistan's wealthiest. The connection is not coincidental. It is structural.
For the broader picture, see my pillar on the electricity crisis and my position on the IPP system.
Now you know what happened to the Manchester of Pakistan. Pass it on.
Thank you for reading.
, Asad Baig, Lahore, April 2026
Frequently asked questions
Why are textile mills closing in Faisalabad? The single most cited cause, in interviews with industry groups, is electricity cost. Pakistani textile factories pay approximately Rs. 38-40 per unit of electricity. Bangladeshi factories pay approximately Rs. 18, Indian Rs. 22, Vietnamese Rs. 15. The cost difference makes Pakistani products non-competitive in international markets.
How many textile units have closed in Faisalabad recently? More than 1,000 small and medium textile units in just the past two years. In Punjab as a whole, at least 187 textile mills have closed. Approximately 700,000 jobs lost in the textile sector nationally.
What was Faisalabad's role in Pakistan's textile industry? Faisalabad was historically Pakistan's textile capital, often called the Manchester of Pakistan. By the 1990s it was the engine of Pakistan's largest export sector, with three generations of families employed in textile manufacturing.
Sources and notes
- The Express Tribune, 187 mills shut down in Punjab (14 February 2025)
- APTMA (All Pakistan Textile Mills Association) public statements 2023-2025
- Naveed Ahmed (APTMA Southern Zone Chairman) public remarks, February 2025
- Pakistan Cotton Ginners Forum reports 2024-2025
- Pakistan Bureau of Statistics, textile export and employment data
Related reading from Asad Baig
The pillar this answers under
Sibling long-tail explainers
- Pakistan vs Bangladesh Electricity Tariff: A 2026 Side-by-Side
- Why Did Pakistan's Textile Industry Collapse While Bangladesh's Grew?
- Why Are Electricity Bills So High in Pakistan in 2026?
Asad Baig