Permission denied was solved by enabling keyboard interactive login. ssh_args was also passed to the sftp login as follows

## SFTP Connection
my %args = (user      => $user,
            password  => $pass,
            debug     => 1,
            ssh_args => { interactive => 1,
                         identity_files => 
                                   [ "/usr2/username/.ssh/id_rsa"], 
                        protocol=>'2,1' 
                     } 
           );

my $sftp = Net::SFTP->new($host, %args) or
    do
    {
        print "Unable to connect to $name\n";
        print "Aborting Connection\n"; 
        goto END;
    };
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