Terraform: String is not interpolated for module provider alias

Question

Terraform version: "1.3.7"

Terraform fails with A provider configuration reference must not be given in quotes. error when trying to provide providers to child module being called inside a for loop.

The dynamic provider definition is done like below:

resource "local_file" "cluster_provider" {
  filename        = "${path.module}/cluster-provider.tf"
  file_permission = "666"
  content         = <<-EOT
    %{for index, cluster in local.config.cluster_list}
    # Init cluster config for helm and kubernetes providers for each cluster
    data "cloud_container_cluster_config" "cluster_config_c${index + 1}" {
        cluster_name_id   = module.k8s_cluster[cluster_${index + 1}].cluster_id
        resource_group_id = module.k8s_cluster[cluster_${index + 1}].resource_group_id
    }

    # Helm provider
    provider "helm" {
      alias = "helm_cluster_${index + 1}"
      kubernetes {
        host  = data.cloud_container_cluster_config.cluster_config_c${index + 1}.host
        token = data.cloud_container_cluster_config.cluster_config_c${index + 1}.token
      }
    }

    # Kubernetes provider
    provider "kubernetes" {
      alias = "kubernetes_cluster_${index + 1}"
      host  = data.cloud_container_cluster_config.cluster_config_c${index + 1}.host
      token = data.cloud_container_cluster_config.cluster_config_c${index + 1}.token
    }
    %{endfor}
EOT
}

The above defined and configured providers are passed to the child module as shown below:

module "k8s_cluster" {
  for_each = {
    for index, cluster in local.config.cluster_list :
    "cluster_${index + 1}" => cluster
  }
  providers = {
    kubernetes = "kubernetes.kubernetes_cluster_${index + 1}" # Error is thrown here
    helm       = "helm.helm_cluster_${index + 1}"
  }
  source                          = "./cluster-child-module"
  cloud_account_key               = var.account_key
  resource_group_id               = local.resource_group_id
  region                          = var.location
  cluster_name                    = var.cluster_name
  ... (other module defined attributes not shown here)
}

Also, based upon findings I could understand that string interpolation is not allowed when defining provider alias as discussed in the HashiCorp GitHub issue: https://github.com/hashicorp/terraform/issues/14273.