Czech government reinstates fuel margin caps, plans windfall tax on refineries

PRAGUE, Sept 21 (Reuters) - The Czech government will reintroduce caps on retailers' fuel margins and cut the diesel tax for the month of October, as conflict in the Middle East pressures energy markets, the Finance Ministry said on Monday.

In another measure, the government approved a proposal for an extraordinary tax on the refining sector, which would be applied in 2026 and 2027 and be set at 50% of the increase in gross margins versus 2025, the ministry said.

The tax is expected to apply to the sole operator of Czech refineries, Poland's Orlen.

• The Czech government ended previous price cap mechanisms in July after putting the regulation in place in April this year following U.S. and Israeli strikes on Iran that caused a surge in global oil prices.

• The ministry said the regulation's reinstatement was due to the escalating Middle East conflict and also limits on oil supplies from Saudi Arabia to European refiners.

• Under the renewed regulation, the cap on retail margins for petrol and diesel will be set at 2.5 Czech crowns ($0.1180)per litre, and the diesel tax will be cut to the European Union minimum.

• The measures, in place during October, will cost the state budget 1.1 billion crowns ($51.90 million), the ministry said.

• The ministry also expects to raise 5.5 billion crowns for the budget from the proposed extraordinary tax on refineries in 2026.

• The windfall tax must still be approved by parliament.

($1 = 21.1930 Czech crowns)

(Reporting by Jan Lopatka and Jason Hovet; Editing by Susan Fenton)