Hi @Sajil Meledath ,
From what I understand you have a physical peripheral and your developing software for it on an Azure VM. What I would do is plug the physical dongle into your on premises machine and then RDP into your dev VM on Azure. Using RDP you can give your remote session access to your local peripherals. I've tested this with my USB Hub and a standard Azure VM. It works great. See a screenshot I took below:
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