Pound candlenuts, add chilli and lemon grass and continue pounding to make a rough paste. Add shrimp paste and shallots and pound till fine.
#Tip: Alternatively, grind all ingredients in a food processor.
Clean squid, peel off skin and cut into 2 cm rings. Wash the tentacles and cut away the black ink sac. Pat dry with paper towels.
Mix the tamarind pulp with water, knead and strain through a sieve to remove seeds. Retain the tamarind water.
Heat a wok or saucepan. Add the oil and heat till it starts to smoke. Add the ground spice mixture and stir fry lightly till the spice mixture dries up, oil exudes and the mixture smells fragrant.
Add the salt, sugar, tamarind water and coconut milk and bring to a boil on high heat.
Add the squid and bring the mixture to a boil. Turn the heat to medium low and simmer for 10-15 minutes till the squid is well cooked and tender.
#Tip: You can continue to simmer for 15 minutes more for the squid to become more tender.