I purchase green chilies and in some days many of them turn red.
Can I use my mixer-grinder to grind them into a powder, or is there some other way? Do I have to roast the peppers before grinding? Do the seeds have to be removed?
Chilies are dried before grinding. There are several ways to dry them:
Discard any peppers with rotten spots, both before and after drying. Before grinding, remove stems and seeds.
Grinding: I've successfully used a blade-type coffee grinder to grind dried peppers into flakes. A blender or food processor should also work, assuming you are handling larger quantities. I must confess puzzlement about what exactly a "mixer-grinder" is, even after consulting the link. I believe the appliance may not have an exact equivalent in Europe or the United States. However, if it is suitable for blending or grinding it should work fine for dried peppers.
I should add that you ought to wear gloves when handling the peppers, and beware of the fumes from the dehydrator or oven, as they may be very pungent. In extreme causes, protective goggles may be a good idea.
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You can definitely use a mixer-grinder (I know what you're referring to) to grind red chillies, and I've done it several times. However, I wouldn't start from green chillies, because your conversion rate (green -> red) will be low. It is better if the chillies ripen on the plant. Since you're in India, it should be very easy for you to buy red chillies from the market in bulk, unlike in the western countries. However, although they look dried, they still have some moisture inside of them and will have to be dried thoroughly before grinding.
Here's what my mom used to do:
1) Buy 1/2 kilo of "dried" red chillies (standard) from the local store. There are two basic kinds of "hot" chillies that are sold. One is moderately long and thin (left) and the other is short, stubby and more roundish (right). Note: the latter kind is much hotter. Choose the one you like.
2) Next buy 1/2 kilo of Kashmiri chillies. These are easily noticeable by the overly wrinkled skin. These chillies have a very mild taste, but are extremely rich in colour. So adding it to the mix will tone down the spiciness of the other kind, while adding a beautiful red colour.
3) Find a large tray (or you can lay newspaper side by side) and spread them both around evenly and let it dry in the hot sun (it's summer time now!) for a week. Remember to cover it with a mesh cloth to prevent birds from messing with it and take it indoors after sunset (you don't want the cool nights to spoil the sun's work). Repeat for a week. A good test to see if it's truly dry is to try snapping a chilli in two. If it starts cracking and breaking at the sides, it is dry. If it just bends and tears, it still has moisture internally.
4) After a week of drying, remove the stems (they should come off easily), but leave the seeds in (if you're removing them, then might as well not add chilli power to your dishes!). Now you can grind the mix little by little (as much would fit in half your mixer-grinder (again, do not fill it to the top, as you need to leave some space for it to move about). You can also find local shops that have industrial grinders (specific to India) to do the grinding for you (grinds much finer than a home mixer) and cost very little.
5) After you grind it, again spread it out on a newspaper/large plate (turn the fan off) and let it cool before you store it in a container. The reason is that the powder will be moderately hot (temperature) when it's out of the mixer and if you store it when it is hot, the moisture from the air close to the surface of the chilli powder will condense on the inside of the lid of the container and make it damp.
Enjoy your home ground red chilli powder. It tastes much better than store bought ones.
The very best peppers I have ever dried were homegrown habaneros that I dried and smoked in our electric smoker at a low temperature ( maybe 145 degrees ) over a mesquite wood for several hours. I think you might be able to replicate this over a very low grill, and use another type of pepper. I have had good success with cayennes as well. It is a simple process to then grind it in a spice grinder, and I would use Yoda's good advice from #4 and #5.