Unable to create Azure Database for Postgres Flexible Server using terraform script due to Internal Server Error.

Question

Hello everyone, I'm unable to create an azurerm_postgresql_flexible_server resource using terrafrom script. I'm getting following error:

user@host:~/infra$ terraform apply tfplan.terraform

azurerm_postgresql_flexible_server.postgressrv: Creating...

azurerm_postgresql_flexible_server.postgressrv: Still creating... [10s elapsed]

azurerm_postgresql_flexible_server.postgressrv: Still creating... [20s elapsed]

azurerm_postgresql_flexible_server.postgressrv: Still creating... [30s elapsed]

azurerm_postgresql_flexible_server.postgressrv: Still creating... [40s elapsed]

azurerm_postgresql_flexible_server.postgressrv: Still creating... [50s elapsed]

azurerm_postgresql_flexible_server.postgressrv: Still creating... [1m0s elapsed]

╷

│ Error: creating Flexible Server (Subscription: "<mysubid>"

│ Resource Group Name: "resgroup-test-postgressrv"

│ Flexible Server Name: "postgres-common-test"): polling after Create: polling failed: the Azure API returned the following error:

│

│ Status: "InternalServerError"

│ Code: ""

│ Message: "An unexpected error occured while processing the request. Tracking ID: '<some_tracking_id>'"

│ Activity Id: ""

│

│ ---

│

│ API Response:

│

│ ----[start]----

│ {"name":"<some_activity_id>","status":"Failed","startTime":"2025-03-07T08:42:00.087Z","error":{"code":"InternalServerError","message":"An unexpected error occured while processing the request. Tracking ID: '<some_tracking_id>'"}}

│ -----[end]-----

│

│

│ with azurerm_postgresql_flexible_server.postgressrv,

│ on main.tf line 6, in resource "azurerm_postgresql_flexible_server" "postgressrv":

│ 6: resource "azurerm_postgresql_flexible_server" "postgressrv" {

Here's my script:
main.tf

resource "azurerm_resource_group" "resource_group" {
  name     = local.resource_group_name
  location = var.location
}

resource "azurerm_postgresql_flexible_server" "postgressrv" {
  name                          = local.hostname
  resource_group_name           = azurerm_resource_group.resource_group.name
  location                      = azurerm_resource_group.resource_group.location
  version                       = var.pg_version
  administrator_login           = var.username
  administrator_password        = var.password
  zone                          = 3
  storage_mb                    = 32768
  storage_tier                  = "P4"
  sku_name                      = var.sku_name
  backup_retention_days         = 7
  geo_redundant_backup_enabled  = false
  public_network_access_enabled = true
  auto_grow_enabled = true

  authentication {
    password_auth_enabled = true
  }

  tags = {
    env     = var.env
    purpose = "airflow"
  }

  depends_on = [azurerm_resource_group.resource_group]
}

variables.tf

variable "env" {
  default = "test"
}

variable "pg_version" {
  default = "16"
}

variable "location" {
  default = "northeurope"
}

variable "sku_name" {
  default = "B_Standard_B1ms"
}

variable "username" {
  default = "mytestpgadmin"
}

variable "password" {
  default = "H4sh1C0rp!!"
}

providers.tf

terraform {
  required_version = ">=1.0"
  required_providers {
    azurerm = {
      source  = "hashicorp/azurerm"
      version = "~>3.0"
    }
  }
}

provider "azurerm" {
  features {}
}

I have already tried removing or changing the zone from 3 to 2 or even 1. I've used Azure Portal to create the same resource, and I was able to create it with same configuration using Azure Portal. What am I doing wrong here, I've prepared this script by following the examples, given at https://registry.terraform.io/providers/tfproviders/azurerm/latest/docs/resources/postgresql_flexible_server
and
https://learn.microsoft.com/en-us/azure/developer/terraform/deploy-postgresql-flexible-server-database?tabs=azure-cli