Pakistani President Pervez Musharraf plans to quit as army chief to become a civilian leader, removing a main objection to his proposed re-election in October, a senior ruling party official said on Monday.

"We expect that after his re-election process next month, God willing, General Musharraf would take his oath of office as a civilian president before November 15," Senator Mushahid Hussain Sayed, secretary-general of the Pakistan Muslim League (PML), told Reuters.

U.S. ally Musharraf retained the post of army chief after he seized power in a military coup in 1999, despite calls from the opposition to quit the dual office.

His acquiescence could be seen as a victory for Benazir Bhutto, who has said that any power-sharing arrangement with Musharraf would depend, among other things, on him becoming a civilian president.

Bhutto's Pakistan People's Party announced on Friday the two-time former prime minister would return to Pakistan on October 18, ending more than eight years of self-exile.

Giving up the army role would undoubtedly dilute Musharraf's power in a country that has been ruled by generals for more than half the 60 years since it was founded.

It will also be a wrench for a life-long soldier who described his uniform as a "second skin". But aides say Musharraf has been reconciled to quitting the army for months.

Senator Sayed said Musharraf would abide by the constitution and quit the army before the end of 2007. Musharraf's term as president expires on November 15.

"Yes, I have no doubt that the president will keep his commitment," said Sayed, who recently met Musharraf.

"He is clear on this issue."

The United States is keenly watching the fate of Musharraf, as instability in a nuclear-armed state where al Qaeda militants are based and from where Taliban insurgents are fighting Western forces in Afghanistan could have far-reaching consequences.

Neighboring India is also monitoring events in Pakistan, with a peace process between the rivals still to yield substantial results after more than 3 ½ years.

LEGAL THREAT

Before quitting the army, Musharraf planned to seek another five-year term as president from the sitting parliament by October 15, Sayed said. A general election is due by mid-January.

The PML and its allies have a majority in parliament, but several members of the ruling coalition have reservations about voting Musharraf another term while he remains in uniform.

An alliance of opposition parties has also threatened to resign from parliament if Musharraf goes ahead with his re-election plans. A walk-out would not affect the election but it would dent its credibility.

Bhutto's PPP is not part of the opposition alliance, whose main member is a Pakistan Muslim League faction led by Nawaz Sharif, the prime minister Musharraf ousted in 1999 and last week dispatched to Saudi Arabia after he tried to return from exile.

But the most significant threat to Musharraf's re-election plans could come from a Supreme Court regarded as hostile after the general's ill-fated attempt to fire the chief justice.

On Monday, the court took up six challenges from Musharraf's opponents -- including the Jamaat-e-Islami religious party, cricketer-turn-politician Imran Khan and a lawyers' forum -- against his bid for re-election and against his keeping the two offices of president and army chief.

At the same time, the Election Commission changed an election rule that will help Musharraf overcome an obstacle to his re-election after stepping down as army chief.

The Commission, citing a 2005 Supreme Court ruling, said a constitutional clause requiring retiring state servants to wait for two years before running for office did not apply to presidential candidates.

If the court blocks Musharraf's re-election he might dissolve the assemblies and seek a mandate from the parliament returned by a general election, or more drastically, he might opt for emergency rule or martial law, analysts say.

(Additional reporting by Kamran Haider)

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