Heat a frying pan over low to medium heat and dry roast the dried red chilis, stirring continuously.
Roast them for about 3-4 minutes or until red chilis become darker in color.
Remove the red chilis from the pan and take them to the bowl or plate.
In the same pan, roast the dry coconut on low heat until lightly golden brown.
Remove it from the pan and place it in the bowl or plate with red chilis.
Coconut will burn faster, so make sure to stir the coconut constantly and roast on low heat.
Now in the same pan, add all the spices except nutmeg powder and red chili powder.
Roast the spices on medium heat, stirring continuously, for few minutes until they are fragrant.
Remove the spices from the pan and place them into the plate with roasted chilis and coconut.
Let them cool completely.
Take all the roasted ingredients into a blender jar, and add nutmeg powder and red chili powder.
Grind the spices into a powder. Set the Kolhapuri Masala Powder aside.
Making Paneer Kolhapuri Gravy
Heat oil in a Kadai or pot or non-stick pan. Add chopped ginger, and sauté for few seconds.
To this, add melon seeds and cashews. Mix well and sauté everything for 2-3 minutes on medium heat.
Now add chopped tomatoes and mix well. Let the mixture cook for few minutes until tomatoes are soft and mushy.
Once tomatoes are soft, turn off the heat and let the mixture cool down.
Once the tomato mixture is cool enough, take it into the blender. Blend it into a fine and smooth puree. Set aside.
Making Paneer Kolhapuri
In the same pan (in which you cook the tomato mixture), heat butter and oil.
Add bay leaf and cinnamon stick. Sauté for a minute.
Now add asafoetida and prepared gravy. Bring the gravy to a boil and cook it for 2-3 minutes.
Then add prepared Kolhapuri Masala Powder (as required), red chili powder, and mix well.
I have added Kashmiri red chili powder, so curry can not be too spicy. Also, Kashmiri red chili makes the curry bright in color.
You can skip adding red chili powder or add your choice of red chili powder.
Cook the gravy for 8-10 minutes and until oil separates from the sides.
Add paneer cubes, salt to taste, and mix well. Add little water if required to adjust the consistency.
Cook the curry for 4-5 minutes. Then add crushed Kasoori methi, yogurt or cream, chopped coriander leaves, and stir well.
Turn off the heat and transfer the curry into a serving bowl.
Serving Suggetions
Serve Paneer Kolhapuri with Roti or Naan. It also goes well with this Whole Wheat Kulcha.
Having this curry with Jeera Rice makes a wholesome lunch or dinner.
You can also serve it with plain steamed rice.
Notes
Blend the puree into a fine and smooth paste for the restaurant-style textured dish. If your blender does not make the puree smooth, you can pass it through the strainer.
Make sure to cook the gravy thoroughly; otherwise, it will taste raw.
You can skip melon seeds if you do not have them and add 3-4 more cashews if you want.
For extra spicy Kolhapuri Masala Powder, use hot dried red chilis instead of Kashmiri red chilis.