By arresting former Prime Minister Zulfiqar Ali Bhutto, the Pakistan army has seriously jeopardized the chances for fair elections next month and has cast doubt on the military establishment's stated intentions to reestablish democratic government.

The arrest, which took place at Bhutto's suburban Kavachi home before dawn yesterday may have set the stage for new chaos in Pakistan and a permanent military takeover.

Army strongman Gen. Zia Ul-Haq, who overthrew Bhutto in a bloodless coup two months ago, has promised to hold general elections Oct. 18. But with Bhutto confined charged with complicity in murder and other crimes, if the elections take place there will be no real contest.

Demonstrator protesting Bhutto's arrest stoned cars and police Karachi and paraded through the streets of Lahore chanting "Long live Bhutto," UPI reported from Pakistan. At least 11 persons were arrested in the port city of Karachi for allegedly organizing the protest.

Lawyer were unable to obtain the former prime minister's release on bail, according to a Reuter report from Lahore. It said the application for bail was postponed after courtroom debate over the procedure to be followed.

The virtual certainty of victory by the nine-party Pakistan National Alliance whose four months of nationwide rioting preceeded the coup seems likely to lead to further upheaval.

Alliance leaders are a loosely amalgamated collection of centrists and rightists who set aside long-standing differences only to remove Bhutto, a nomiual Socialist.

With the 49-year-old former prime minister now apparently out the way the cement which bound the nine leaders together is liable to crumble, possibly even before the elections. This would effectively leave Pakistan, a strongly Moslem nation of 71 million without civilian leadership.

A few week ago one of Pakistan's most highly regarded political scientists said in Rawalpindi that the army was fully aware of this. Specifically, several of the army's corps commanders planned to capitalize on the Alliance's weakness so that they could then appear to come to the rescue of the country he claimed.

The PNA is not a governing coalition, this expert said. "The result of their victory will be a short period, perhaps six months, of grave instability. Then the army will move in and stay put."

It was essential to this plan according to the political scientist, that the army seize power in July and establish itself as a "legitimate arbiter." "Then, when the time comes that the PNA government collapses, the army will be able to make its move and say with conviction. "You see, we gave the politicians the opportunity to run the country but they made a hash of it. We have no choice but to take over if we are to save the nation.'"

Such a scenario would seem to be contrary to Zia's publicly stated, views. Speaking to journalists in Rawalpindi just three days ago, the deeply religious officer said that if the army was forced to intervene again."Pakistan is finished. Take it from me, if there is a fourth martial law Pakistan is finished."

The country, which was carved out of India bu the departing British rulers in 1947 to make a homeland for Moslems of the Subcontinent, first fell under military control in 1958 when late Field Marshal Ayub Khan seized power.

In 1969, Gen. Mohammed Yahya Khan seized power. Yahya fell in disgrace in 1972 when India intervened in a civil war in East Pakistan and created the independent state of Bangladesh. Bhutto then came to power and established a semblance of democratic rule, only to be overthrown by Zia after the Alliance claimed the elections this year had been massively rigged.

Zia respected by most Pakistanis as a well-meaning soldier, told the reporters that once a new National Assembly is formed following the promised elections, he would appear before the legislators and tell them, "You pray that martial law does not go beyoud 1977. Today's martial law adminstrators have no ulterior motive. Three years hence, a person may be more ambitious.

Zia did not suggest who this person might be. Nevertheless, a number of informed Pakistanis point to several of the army's leading corps commanders as the power behind Zia.

Immediately after seizing power, Zia announced: "I am working on a 90-day operation to put the country back on its democratic footing." He then set Oct. 18 as the date for new elections.

More recently, though, he suggested that if both sides agreed, he had no objection to delaying elections. Although Zia did not say so, this appeared to be in response to demand by Alliance leaders that the vote be rescheduled so that Bhutto could be tried on a number of charges of corruption, misuse of power and the allegation which ultimately resulted in his arrest, ordering federal security officers to murder one of Bhutto's prominent political enemies, Ahmad Araza Kasuri. The killers evidently bungled and slew Kasuri's father instead.

It is not clear to what extent of Zia's actions have been in response to pressure from his corps commanders. At a Moslem service on the first Friday after he came to power, Zia told those demanding that the former prime minister be punished that their behavior was not Islamic.

The army however ordered inquiries into widespread allegations of officially sanctioned kidnapings and torture of political figures. Another investigation was launched into the activities of a paramilitary force set up by Bhutto.

The army subsequently took a number of key steps which enhanced its popularity and increased doubts among observers about its supposed impartiality in the impending elections.

The first of these measures was the imposition of harsh religious laws based on the Koran. These laws, which at least 350 persons were of thieves and whipping other offenders, are extraordinarily popular among a surprisingly wide sector of Pakistanis. The amputation ruling is not known to have been exercised so far.

The alliance had demanded the reimposition of the Koranic laws, repealed by Bhutto during its violent post-election campaign against him, in which at least 350 persons were killed.

Just last week the army took another step which seemed intended to improve its public image, badly tarnished by the humiliating defeat in Bangladesh. Zia announced that he was denationalizing all flour and rice-husking mills in the country. Bhutto had taken over the mills in an effort to reduce the price of basic food commodities, but critics said the plan failed.

The general also announced that he would return a third of Pakistan's 579 cotton ginning mills to private owners.