Wash the dried prawns well to get rid of any impurities. Drain in tissue paper.
Heat about 2 tsp oil in a pan and add dry red chillies and shallots. When shallots start turning light brown, add the dried prawns and saute for a few minutes. Add shredded coconut and salt. No need to roast the coconut much, just combine everything well and saute for 1-2 minutes.
Let this cool a little and then grind coarsely along with tamarind and 1-2 tsp of water. This is a dry chutney, so no need to add more water.