For submitting the ITIN application for my wife in India:
If we have copies of her passport attested from the regional passport office in India,is it enough to submit the ITIN application or is it mandatory to get the Apostille as well from Ministry of External affairs.
When contacted concerned agencies they are telling that they won't issue Apostille for passports,but rather do for Birth,Death,degree certificates,etc..

Please advise.Totally in a confused situation

You MUST get the apostile from the Indian government. The IRS has had too many cases of Third Wrold notaries falsely certifying that the passport is authentic.