Hello Punit, Welcome to MS Q&A
Blobfuse2 cannot be used in Azure Container Instances (ACI) because ACI does not support FUSE-based mounts, even when using the --privileged flag. If you need to mount storage in ACI, consider using Azure Files instead. Alternatively, you can interact with Blob Storage using SDKs or APIs. If full container privileges are required, Azure Kubernetes Service (AKS) is a better alternative as it provides more flexibility and control over container operations.
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Deepanshu